Investors looking for stocks in the Banks - Foreign sector might want to consider either Barclays (BCS) or Banco Itau (ITUB). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, both Barclays and Banco Itau are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
BCS currently has a forward P/E ratio of 7.92, while ITUB has a forward P/E of 9.63. We also note that BCS has a PEG ratio of 0.43. 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. ITUB currently has a PEG ratio of 0.92.
Another notable valuation metric for BCS is its P/B ratio of 0.78. 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, ITUB has a P/B of 2.42.
These are just a few of the metrics contributing to BCS's Value grade of A and ITUB's Value grade of C.
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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Barclays PLC (BCS): Free Stock Analysis Report Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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