BCS vs. ITUB: Which Stock Is the Better Value Option?

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Barclays (BCS) and Banco Itau (ITUB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Both Barclays and Banco Itau have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

BCS currently has a forward P/E ratio of 8.79, while ITUB has a forward P/E of 10.64. We also note that BCS has a PEG ratio of 0.38. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ITUB currently has a PEG ratio of 1.01.

Another notable valuation metric for BCS is its P/B ratio of 0.85. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ITUB has a P/B of 2.63.

These metrics, and several others, help BCS earn a Value grade of A, while ITUB has been given a Value grade of D.

Both BCS and ITUB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BCS is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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