Investors interested in Banks - Major Regional stocks are likely familiar with U.S. Bancorp (USB) and State Street Corporation (STT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, U.S. Bancorp has a Zacks Rank of #2 (Buy), while State Street Corporation has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that USB is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
USB currently has a forward P/E ratio of 11.38, while STT has a forward P/E of 11.41. We also note that USB has a PEG ratio of 1.02. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. STT currently has a PEG ratio of 1.16.
Another notable valuation metric for USB is its P/B ratio of 1.51. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, STT has a P/B of 1.52.
These are just a few of the metrics contributing to USB's Value grade of B and STT's Value grade of D.
USB sticks out from STT in both our Zacks Rank and Style Scores models, so value investors will likely feel that USB is the better option right now.
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U.S. Bancorp (USB): Free Stock Analysis Report State Street Corporation (STT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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