Investors with an interest in Banks - Northeast stocks have likely encountered both Eagle Bancorp (EGBN) and Community Bank System (CBU). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Eagle Bancorp is sporting a Zacks Rank of #2 (Buy), while Community Bank System has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EGBN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EGBN currently has a forward P/E ratio of 10.65, while CBU has a forward P/E of 17.09. We also note that EGBN has a PEG ratio of 0.86. 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. CBU currently has a PEG ratio of 2.14.
Another notable valuation metric for EGBN is its P/B ratio of 1.52. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CBU has a P/B of 1.71.
These are just a few of the metrics contributing to EGBN's Value grade of B and CBU's Value grade of D.
EGBN has seen stronger estimate revision activity and sports more attractive valuation metrics than CBU, so it seems like value investors will conclude that EGBN is the superior option right now.
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Eagle Bancorp, Inc. (EGBN) : Free Stock Analysis Report
Community Bank System, Inc. (CBU) : Free Stock Analysis Report
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