Investors with an interest in Banks - Foreign stocks have likely encountered both Mizuho (MFG) and National Australia Bank Ltd. (NABZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Mizuho and National Australia Bank Ltd. are both sporting a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
MFG currently has a forward P/E ratio of 10.98, while NABZY has a forward P/E of 17.11. We also note that MFG has a PEG ratio of 0.69. 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. NABZY currently has a PEG ratio of 12.77.
Another notable valuation metric for MFG is its P/B ratio of 1. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NABZY has a P/B of 1.9.
These metrics, and several others, help MFG earn a Value grade of B, while NABZY has been given a Value grade of D.
Both MFG and NABZY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MFG is the superior value option right now.
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Mizuho Financial Group, Inc. (MFG): Free Stock Analysis Report National Australia Bank Ltd. (NABZY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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