Investors with an interest in Banks - Foreign stocks have likely encountered both Sumitomo Mitsui (SMFG) and Royal Bank (RY). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, Sumitomo Mitsui is sporting a Zacks Rank of #2 (Buy), while Royal Bank has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SMFG has an improving earnings outlook. 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.
SMFG currently has a forward P/E ratio of 6.94, while RY has a forward P/E of 11.22. We also note that SMFG has a PEG ratio of 1.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. RY currently has a PEG ratio of 1.96.
Another notable valuation metric for SMFG is its P/B ratio of 0.48. 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, RY has a P/B of 1.91.
These are just a few of the metrics contributing to SMFG's Value grade of A and RY's Value grade of D.
SMFG 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 SMFG is likely the superior value option right now.
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Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
Royal Bank Of Canada (RY) : Free Stock Analysis Report
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