Investors looking for stocks in the Financial - Investment Bank sector might want to consider either The Charles Schwab Corporation (SCHW) or MarketAxess (MKTX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
The Charles Schwab Corporation and MarketAxess are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that SCHW likely has seen a stronger improvement to its earnings outlook than MKTX has recently. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SCHW currently has a forward P/E ratio of 20.07, while MKTX has a forward P/E of 24.58. We also note that SCHW has a PEG ratio of 0.81. 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. MKTX currently has a PEG ratio of 8.26.
Another notable valuation metric for SCHW is its P/B ratio of 4.11. 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, MKTX has a P/B of 4.93.
These are just a few of the metrics contributing to SCHW's Value grade of B and MKTX's Value grade of D.
SCHW stands above MKTX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SCHW 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.
