Investors looking for stocks in the Banks - Foreign sector might want to consider either Shinhan Financial (SHG) or Erste Group Bank AG (EBKDY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both Shinhan Financial and Erste Group Bank AG have a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.
SHG currently has a forward P/E ratio of 8.58, while EBKDY has a forward P/E of 11.73. We also note that SHG has a PEG ratio of 0.55. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EBKDY currently has a PEG ratio of 0.68.
Another notable valuation metric for SHG is its P/B ratio of 0.81. 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, EBKDY has a P/B of 1.37.
These are just a few of the metrics contributing to SHG's Value grade of A and EBKDY's Value grade of C.
Both SHG and EBKDY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SHG is the superior value option right now.
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