Investors looking for stocks in the Banks - Foreign sector might want to consider either Erste Group Bank AG (EBKDY) or Banco Macro (BMA). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Erste Group Bank AG has a Zacks Rank of #2 (Buy), while Banco Macro has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EBKDY is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
EBKDY currently has a forward P/E ratio of 9.37, while BMA has a forward P/E of 15.55. We also note that EBKDY has a PEG ratio of 0.54. 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. BMA currently has a PEG ratio of 0.56.
Another notable valuation metric for EBKDY is its P/B ratio of 1.07. 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, BMA has a P/B of 1.09.
These are just a few of the metrics contributing to EBKDY's Value grade of B and BMA's Value grade of C.
EBKDY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that EBKDY is likely 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.
