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Investors interested in Banks - Foreign stocks are likely familiar with Banco Do Brasil SA (BDORY) and Sumitomo Mitsui (SMFG). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Banco Do Brasil SA has a Zacks Rank of #1 (Strong Buy), while Sumitomo Mitsui has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BDORY has an improving earnings outlook. 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.
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.
BDORY currently has a forward P/E ratio of 4.01, while SMFG has a forward P/E of 30.13. We also note that BDORY has a PEG ratio of 1.43. 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. SMFG currently has a PEG ratio of 1.77.
Another notable valuation metric for BDORY is its P/B ratio of 0.77. 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, SMFG has a P/B of 0.88.
These are just a few of the metrics contributing to BDORY's Value grade of B and SMFG's Value grade of C.
BDORY sticks out from SMFG in both our Zacks Rank and Style Scores models, so value investors will likely feel that BDORY is the better option right now.
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Banco Do Brasil SA (BDORY) : Free Stock Analysis Report
Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).