Investors interested in Banks - Foreign stocks are likely familiar with Toronto-Dominion Bank (TD) and ICICI Bank Limited (IBN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Toronto-Dominion Bank and ICICI Bank Limited have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
TD currently has a forward P/E ratio of 13.73, while IBN has a forward P/E of 18.92. We also note that TD has a PEG ratio of 1.23. 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. IBN currently has a PEG ratio of 1.40.
Another notable valuation metric for TD is its P/B ratio of 1.79. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, IBN has a P/B of 2.68.
These metrics, and several others, help TD earn a Value grade of B, while IBN has been given a Value grade of C.
Both TD and IBN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TD 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.
