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Investors interested in Banks - Foreign stocks are likely familiar with Barclays (BCS) and Erste Group Bank AG (EBKDY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Barclays has a Zacks Rank of #2 (Buy), while Erste Group Bank AG has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that BCS likely has seen a stronger improvement to its earnings outlook than EBKDY has recently. However, value investors will care about much more than just this.
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.
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.
BCS currently has a forward P/E ratio of 7.90, while EBKDY has a forward P/E of 9.11. We also note that BCS has a PEG ratio of 0.41. 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. EBKDY currently has a PEG ratio of 1.15.
Another notable valuation metric for BCS is its P/B ratio of 0.62. 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, EBKDY has a P/B of 0.94.
Based on these metrics and many more, BCS holds a Value grade of B, while EBKDY has a Value grade of D.
BCS stands above EBKDY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BCS is the superior value option right now.
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Barclays PLC (BCS) : Free Stock Analysis Report
Erste Group Bank AG (EBKDY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).