Investors with an interest in Banks - Southwest stocks have likely encountered both Texas Capital (TCBI) and Cullen/Frost Bankers (CFR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Texas Capital is sporting a Zacks Rank of #1 (Strong Buy), while Cullen/Frost Bankers has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that TCBI likely has seen a stronger improvement to its earnings outlook than CFR has recently. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
TCBI currently has a forward P/E ratio of 12.52, while CFR has a forward P/E of 13.55. We also note that TCBI has a PEG ratio of 0.46. 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. CFR currently has a PEG ratio of 5.08.
Another notable valuation metric for TCBI is its P/B ratio of 1.31. 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, CFR has a P/B of 2.
These are just a few of the metrics contributing to TCBI's Value grade of B and CFR's Value grade of C.
TCBI sticks out from CFR in both our Zacks Rank and Style Scores models, so value investors will likely feel that TCBI is the better option right now.
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Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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