Investors interested in stocks from the Banks - Foreign sector have probably already heard of Deutsche Bank (DB) and HDFC Bank (HDB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Deutsche Bank has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DB has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
DB currently has a forward P/E ratio of 8.97, while HDB has a forward P/E of 21.81. We also note that DB has a PEG ratio of 0.34. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HDB currently has a PEG ratio of 1.40.
Another notable valuation metric for DB is its P/B ratio of 0.82. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, HDB has a P/B of 2.67.
Based on these metrics and many more, DB holds a Value grade of B, while HDB has a Value grade of D.
DB sticks out from HDB in both our Zacks Rank and Style Scores models, so value investors will likely feel that DB is the better option right now.
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Deutsche Bank Aktiengesellschaft (DB): Free Stock Analysis Report HDFC Bank Limited (HDB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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