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Investors interested in Banks - Foreign stocks are likely familiar with Hang Seng Bank Ltd. (HSNGY) and Commonwealth Bank of Australia Sponsored ADR (CMWAY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Hang Seng Bank Ltd. has a Zacks Rank of #2 (Buy), while Commonwealth Bank of Australia Sponsored ADR has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HSNGY is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
HSNGY currently has a forward P/E ratio of 12.25, while CMWAY has a forward P/E of 24.63. We also note that HSNGY has a PEG ratio of 5.65. 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. CMWAY currently has a PEG ratio of 7.94.
Another notable valuation metric for HSNGY is its P/B ratio of 1.16. 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, CMWAY has a P/B of 3.29.
These metrics, and several others, help HSNGY earn a Value grade of B, while CMWAY has been given a Value grade of F.
HSNGY 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 HSNGY is likely the superior value option right now.
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