Investors with an interest in Banks - West stocks have likely encountered both East West Bancorp (EWBC) and Bank of Hawaii (BOH). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
East West Bancorp has a Zacks Rank of #2 (Buy), while Bank of Hawaii has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EWBC is likely seeing its earnings outlook improve to a greater extent. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
EWBC currently has a forward P/E ratio of 13.65, while BOH has a forward P/E of 15.47. We also note that EWBC has a PEG ratio of 1.30. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. BOH currently has a PEG ratio of 1.82.
Another notable valuation metric for EWBC is its P/B ratio of 2.32. 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, BOH has a P/B of 2.76.
Based on these metrics and many more, EWBC holds a Value grade of B, while BOH has a Value grade of C.
EWBC stands above BOH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EWBC is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report
To read this article on Zacks.com click here.