Investors looking for stocks in the Banks - Foreign sector might want to consider either Bancolombia (CIB) or ICICI Bank Limited (IBN). 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.
Bancolombia and ICICI Bank Limited are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CIB likely has seen a stronger improvement to its earnings outlook than IBN has recently. But this is just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CIB currently has a forward P/E ratio of 7.51, while IBN has a forward P/E of 20.13. We also note that CIB has a PEG ratio of 1.06. 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. IBN currently has a PEG ratio of 2.02.
Another notable valuation metric for CIB is its P/B ratio of 2.38. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, IBN has a P/B of 2.83.
These metrics, and several others, help CIB earn a Value grade of A, while IBN has been given a Value grade of D.
CIB stands above IBN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CIB is the superior value option right now.
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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.
