ITUB vs. HDB: Which Stock Is the Better Value Option?
Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Itau (ITUB) and HDFC Bank (HDB). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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, Banco Itau has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ITUB has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ITUB currently has a forward P/E ratio of 7.32, while HDB has a forward P/E of 20.52. We also note that ITUB has a PEG ratio of 0.64. 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. HDB currently has a PEG ratio of 1.34.
Another notable valuation metric for ITUB is its P/B ratio of 1.37. 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 2.04.
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
