Investors interested in stocks from the Banks - Foreign sector have probably already heard of HSBC (HSBC) and National Australia Bank Ltd. (NABZY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both HSBC and National Australia Bank Ltd. have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
HSBC currently has a forward P/E ratio of 9.46, while NABZY has a forward P/E of 17.46. We also note that HSBC has a PEG ratio of 0.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NABZY currently has a PEG ratio of 3.30.
Another notable valuation metric for HSBC is its P/B ratio of 1.29. 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, NABZY has a P/B of 2.34.
These metrics, and several others, help HSBC earn a Value grade of B, while NABZY has been given a Value grade of D.
Both HSBC and NABZY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HSBC is the superior value option right now.
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National Australia Bank Ltd. (NABZY) : 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.
