Investors with an interest in Banks - Foreign stocks have likely encountered both The Bank of East Asia Ltd. (BKEAY) and HDFC Bank (HDB). 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.
The Bank of East Asia Ltd. and HDFC Bank are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BKEAY likely has seen a stronger improvement to its earnings outlook than HDB has recently. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BKEAY currently has a forward P/E ratio of 7.27, while HDB has a forward P/E of 15.50. We also note that BKEAY has a PEG ratio of 0.23. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. HDB currently has a PEG ratio of 1.22.
Another notable valuation metric for BKEAY is its P/B ratio of 0.31. 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, HDB has a P/B of 1.94.
These metrics, and several others, help BKEAY earn a Value grade of A, while HDB has been given a Value grade of D.
BKEAY has seen stronger estimate revision activity and sports more attractive valuation metrics than HDB, so it seems like value investors will conclude that BKEAY is the superior option right now.
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HDFC Bank Limited (HDB) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
