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FBIZ vs. LKFN: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors with an interest in Banks - Midwest stocks have likely encountered both First Business Financial Services (FBIZ) and Lakeland Financial (LKFN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

First Business Financial Services has a Zacks Rank of #1 (Strong Buy), while Lakeland Financial has a Zacks Rank of #5 (Strong Sell) right now. 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 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.

FBIZ currently has a forward P/E ratio of 9.69, while LKFN has a forward P/E of 13.79. We also note that FBIZ has a PEG ratio of 1.21. 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. LKFN currently has a PEG ratio of 1.38.

Another notable valuation metric for FBIZ is its P/B ratio of 1.08. 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, LKFN has a P/B of 2.12.

Based on these metrics and many more, FBIZ holds a Value grade of B, while LKFN has a Value grade of D.

FBIZ has seen stronger estimate revision activity and sports more attractive valuation metrics than LKFN, so it seems like value investors will conclude that FBIZ is the superior option right now.

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First Business Financial Services, Inc. (FBIZ) : Free Stock Analysis Report
Lakeland Financial Corporation (LKFN) : Free Stock Analysis Report
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Zacks Investment Research