Investors interested in stocks from the Banks - Foreign sector have probably already heard of Grupo Financiero Galicia (GGAL) and Sumitomo Mitsui (SMFG). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Grupo Financiero Galicia and Sumitomo Mitsui have a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
GGAL currently has a forward P/E ratio of 13.12, while SMFG has a forward P/E of 13.42. We also note that GGAL has a PEG ratio of 0.27. 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. SMFG currently has a PEG ratio of 0.96.
Another notable valuation metric for GGAL is its P/B ratio of 1.31. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SMFG has a P/B of 1.32.
Based on these metrics and many more, GGAL holds a Value grade of B, while SMFG has a Value grade of D.
Both GGAL and SMFG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GGAL is the superior value option right now.
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