ITUB or HDB: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Itau (ITUB) or HDFC Bank (HDB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Banco Itau has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #4 (Sell) right now. This means that ITUB's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
ITUB currently has a forward P/E ratio of 7.04, while HDB has a forward P/E of 20.59. We also note that ITUB has a PEG ratio of 0.61. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HDB currently has a PEG ratio of 1.34.
Another notable valuation metric for ITUB is its P/B ratio of 1.32. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, HDB has a P/B of 2.88.
Based on these metrics and many more, ITUB holds a Value grade of B, while HDB has a Value grade of C.
ITUB is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ITUB is likely the superior value option right now.
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Itau Unibanco Holding S.A. (ITUB) : Free Stock Analysis Report
HDFC Bank Limited (HDB) : Free Stock Analysis Report
