SMFG vs. HDB: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Banks - Foreign sector have probably already heard of Sumitomo Mitsui (SMFG) and HDFC Bank (HDB). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Sumitomo Mitsui has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold) right now. 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SMFG currently has a forward P/E ratio of 8.29, while HDB has a forward P/E of 24.47. We also note that SMFG has a PEG ratio of 0.45. 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. HDB currently has a PEG ratio of 1.13.
Another notable valuation metric for SMFG is its P/B ratio of 0.48. 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 3.88.
These metrics, and several others, help SMFG earn a Value grade of B, while HDB has been given a 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
HDFC Bank Limited (HDB) : Free Stock Analysis Report
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