Investors interested in stocks from the Banks - Foreign sector have probably already heard of Sumitomo Mitsui (SMFG) and National Australia Bank Ltd. (NABZY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Both Sumitomo Mitsui 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 piece of the puzzle for value investors.
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.
SMFG currently has a forward P/E ratio of 11.30, while NABZY has a forward P/E of 19.26. We also note that SMFG has a PEG ratio of 0.82. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NABZY currently has a PEG ratio of 10.19.
Another notable valuation metric for SMFG is its P/B ratio of 1.08. 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 2.27.
These metrics, and several others, help SMFG earn a Value grade of B, while NABZY has been given a Value grade of D.
Both SMFG and NABZY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SMFG is the superior value option right now.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
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.
