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SIVB vs. FRC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Banks - West sector might want to consider either SVB Financial (SIVB) or First Republic Bank (FRC). 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.

Right now, both SVB Financial and First Republic Bank are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.

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.

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.

SIVB currently has a forward P/E ratio of 16.48, while FRC has a forward P/E of 21. We also note that SIVB has a PEG ratio of 2.06. 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. FRC currently has a PEG ratio of 4.02.

Another notable valuation metric for SIVB is its P/B ratio of 1.55. 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, FRC has a P/B of 1.95.

These are just a few of the metrics contributing to SIVB's Value grade of B and FRC's Value grade of C.

Both SIVB and FRC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SIVB is the superior value option right now.


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SVB Financial Group (SIVB) : Free Stock Analysis Report
 
First Republic Bank (FRC) : Free Stock Analysis Report
 
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Zacks Investment Research