ITUB vs. HDB: Which Stock Is the Better Value Option?
Investors with an interest in Banks - Foreign stocks have likely encountered both Banco Itau (ITUB) and HDFC Bank (HDB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Banco Itau has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #5 (Strong Sell). 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.
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.
ITUB currently has a forward P/E ratio of 7.71, while HDB has a forward P/E of 22.79. We also note that ITUB has a PEG ratio of 0.73. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HDB currently has a PEG ratio of 1.48.
Another notable valuation metric for ITUB is its P/B ratio of 1.40. 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 3.26.
These metrics, and several others, help ITUB earn a Value grade of B, while HDB has been given a Value grade of F.
ITUB has seen stronger estimate revision activity and sports more attractive valuation metrics than HDB, so it seems like value investors will conclude that ITUB is the superior 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
