Investors interested in stocks from the Banks - Foreign sector have probably already heard of HSBC (HSBC) and Toronto-Dominion Bank (TD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, HSBC is sporting a Zacks Rank of #2 (Buy), while Toronto-Dominion 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. However, value investors will care about much more than just this.
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 8.81, while TD has a forward P/E of 11.34. We also note that HSBC has a PEG ratio of 1.10. 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. TD currently has a PEG ratio of 1.54.
Another notable valuation metric for HSBC is its P/B ratio of 1.09. 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, TD has a P/B of 1.41.
These metrics, and several others, help HSBC earn a Value grade of B, while TD has been given a Value grade of D.
HSBC stands above TD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HSBC is the superior value option right now.
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Toronto Dominion Bank (The) (TD) : 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.
