Investors with an interest in Financial - Investment Bank stocks have likely encountered both The PNC Financial Services Group, Inc (PNC) and Goldman Sachs (GS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both The PNC Financial Services Group, Inc and Goldman Sachs 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. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PNC currently has a forward P/E ratio of 11.86, while GS has a forward P/E of 15.94. We also note that PNC has a PEG ratio of 0.91. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GS currently has a PEG ratio of 1.11.
Another notable valuation metric for PNC is its P/B ratio of 1.41. 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, GS has a P/B of 2.16.
Based on these metrics and many more, PNC holds a Value grade of B, while GS has a Value grade of D.
Both PNC and GS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PNC is the superior value option right now.
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The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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