Investors with an interest in Banks - Northeast stocks have likely encountered both 1st Constitution Bancorp (FCCY) and Webster Financial (WBS). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both 1st Constitution Bancorp and Webster Financial have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.
FCCY currently has a forward P/E ratio of 15.38, while WBS has a forward P/E of 18.66. We also note that FCCY has a PEG ratio of 1.92. 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. WBS currently has a PEG ratio of 2.33.
Another notable valuation metric for FCCY is its P/B ratio of 1.56. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WBS has a P/B of 2.37.
Based on these metrics and many more, FCCY holds a Value grade of B, while WBS has a Value grade of C.
Both FCCY and WBS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FCCY is the superior value option right now.
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1st Constitution Bancorp (NJ) (FCCY) : Free Stock Analysis Report
Webster Financial Corporation (WBS) : Free Stock Analysis Report
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