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Investors looking for stocks in the Financial - Investment Bank sector might want to consider either Raymond James Financial, Inc. (RJF) or The Charles Schwab Corporation (SCHW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, both Raymond James Financial, Inc. and The Charles Schwab Corporation are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
RJF currently has a forward P/E ratio of 13.47, while SCHW has a forward P/E of 18.54. We also note that RJF has a PEG ratio of 0.87. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SCHW currently has a PEG ratio of 0.96.
Another notable valuation metric for RJF is its P/B ratio of 2.59. 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, SCHW has a P/B of 3.55.
These are just a few of the metrics contributing to RJF's Value grade of B and SCHW's Value grade of C.
Both RJF and SCHW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RJF is the superior value option right now.
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Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).