Investors looking for stocks in the Banks - Foreign sector might want to consider either HSBC (HSBC) or HDFC Bank (HDB). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, HSBC is sporting a Zacks Rank of #1 (Strong Buy), while HDFC Bank has a Zacks Rank of #3 (Hold). This means that HSBC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
HSBC currently has a forward P/E ratio of 10.01, while HDB has a forward P/E of 21.79. We also note that HSBC has a PEG ratio of 1.56. 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 1.77.
Another notable valuation metric for HSBC is its P/B ratio of 1.22. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, HDB has a P/B of 2.67.
These are just a few of the metrics contributing to HSBC's Value grade of B and HDB's Value grade of C.
HSBC 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 HSBC 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.
