Markets

BMO or WBK: Which Is the Better Value Stock Right Now?

Investors with an interest in Banks - Foreign stocks have likely encountered both Bank of Montreal (BMO) and Westpac Banking Corporation (WBK). 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.

Right now, Bank of Montreal is sporting a Zacks Rank of #2 (Buy), while Westpac Banking Corporation has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BMO has an improving earnings outlook. But this is only part of the picture 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.

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.

BMO currently has a forward P/E ratio of 10.56, while WBK has a forward P/E of 12.93. We also note that BMO has a PEG ratio of 2. 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. WBK currently has a PEG ratio of 8.62.

Another notable valuation metric for BMO is its P/B ratio of 1.41. 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, WBK has a P/B of 1.49.

These metrics, and several others, help BMO earn a Value grade of B, while WBK has been given a Value grade of D.

BMO sticks out from WBK in both our Zacks Rank and Style Scores models, so value investors will likely feel that BMO is the better option right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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