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FBIZ or MBWM: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors interested in Banks - Midwest stocks are likely familiar with First Business Financial Services (FBIZ) and Mercantile Bank (MBWM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Currently, First Business Financial Services has a Zacks Rank of #2 (Buy), while Mercantile Bank 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 FBIZ 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 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.

FBIZ currently has a forward P/E ratio of 9.98, while MBWM has a forward P/E of 12.43. We also note that FBIZ has a PEG ratio of 1.25. 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. MBWM currently has a PEG ratio of 1.55.

Another notable valuation metric for FBIZ is its P/B ratio of 1.01. 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, MBWM has a P/B of 1.40.

These metrics, and several others, help FBIZ earn a Value grade of B, while MBWM has been given a Value grade of C.

FBIZ stands above MBWM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FBIZ is the superior value option right now.


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First Business Financial Services, Inc. (FBIZ) : Free Stock Analysis Report
 
Mercantile Bank Corporation (MBWM) : Free Stock Analysis Report
 
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Zacks Investment Research