Investors interested in stocks from the Banks - Foreign sector have probably already heard of Shinhan Financial (SHG) and Canadian Imperial Bank (CM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Both Shinhan Financial and Canadian Imperial Bank 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. But this is just one factor that value investors are interested in.
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 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.
SHG currently has a forward P/E ratio of 6.13, while CM has a forward P/E of 11.65. We also note that SHG has a PEG ratio of 0.53. 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. CM currently has a PEG ratio of 1.49.
Another notable valuation metric for SHG is its P/B ratio of 0.52. 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, CM has a P/B of 1.63.
These are just a few of the metrics contributing to SHG's Value grade of A and CM's Value grade of C.
Both SHG and CM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SHG is the superior value option right now.
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Shinhan Financial Group Co Ltd (SHG): Free Stock Analysis Report Canadian Imperial Bank of Commerce (CM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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