Investors interested in stocks from the Banks - Foreign sector have probably already heard of Sumitomo Mitsui (SMFG) and Banco Bilbao (BBVA). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Sumitomo Mitsui has a Zacks Rank of #2 (Buy), while Banco Bilbao has a Zacks Rank of #3 (Hold). This means that SMFG'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.
SMFG currently has a forward P/E ratio of 7.27, while BBVA has a forward P/E of 7.48. We also note that SMFG has a PEG ratio of 2.71. 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. BBVA currently has a PEG ratio of 3.21.
Another notable valuation metric for SMFG is its P/B ratio of 0.47. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, BBVA has a P/B of 0.58.
These metrics, and several others, help SMFG earn a Value grade of B, while BBVA has been given a Value grade of D.
SMFG stands above BBVA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SMFG is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
Banco Bilbao Viscaya Argentaria S.A. (BBVA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research