Investors interested in stocks from the Banks - Northeast sector have probably already heard of 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both 1st Constitution Bancorp and Webster Financial are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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 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.
FCCY currently has a forward P/E ratio of 15.31, while WBS has a forward P/E of 18.70. We also note that FCCY has a PEG ratio of 1.91. 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 2.34.
Another notable valuation metric for FCCY is its P/B ratio of 1.65. 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, WBS has a P/B of 2.37.
These are just a few of the metrics contributing to FCCY's Value grade of B and WBS's Value grade of D.
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.
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
1st Constitution Bancorp (NJ) (FCCY) : Free Stock Analysis Report
Webster Financial Corporation (WBS) : Free Stock Analysis Report
To read this article on Zacks.com click here.