Investors with an interest in Banks - Midwest stocks have likely encountered both Huntington Bancshares (HBAN) and Commerce Bancshares (CBSH). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Huntington Bancshares and Commerce Bancshares are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HBAN has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
HBAN currently has a forward P/E ratio of 11.09, while CBSH has a forward P/E of 15.52. We also note that HBAN has a PEG ratio of 1.22. 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. CBSH currently has a PEG ratio of 4.18.
Another notable valuation metric for HBAN is its P/B ratio of 1.26. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CBSH has a P/B of 2.43.
Based on these metrics and many more, HBAN holds a Value grade of B, while CBSH has a Value grade of C.
HBAN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HBAN is likely the superior value option right now.
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Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report Commerce Bancshares, Inc. (CBSH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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