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PB vs. BANC: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Banks - Southwest stocks are likely familiar with Prosperity Bancshares (PB) and Banc of California (BANC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Prosperity Bancshares has a Zacks Rank of #2 (Buy), while Banc of California has a Zacks Rank of #4 (Sell). This means that PB'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 also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

PB currently has a forward P/E ratio of 13.19, while BANC has a forward P/E of 22.17. We also note that PB has a PEG ratio of 1.32. 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. BANC currently has a PEG ratio of 2.02.

Another notable valuation metric for PB is its P/B ratio of 0.80. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BANC has a P/B of 1.13.

These metrics, and several others, help PB earn a Value grade of B, while BANC has been given a Value grade of C.

PB sticks out from BANC in both our Zacks Rank and Style Scores models, so value investors will likely feel that PB is the better option right now.


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