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Investors with an interest in Financial - Investment Bank stocks have likely encountered both Raymond James Financial, Inc. (RJF) and The Charles Schwab Corporation (SCHW). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Raymond James Financial, Inc. is sporting a Zacks Rank of #2 (Buy), while The Charles Schwab Corporation 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 RJF has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
RJF currently has a forward P/E ratio of 14.19, while SCHW has a forward P/E of 18.95. We also note that RJF has a PEG ratio of 0.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SCHW currently has a PEG ratio of 1.31.
Another notable valuation metric for RJF is its P/B ratio of 2.75. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SCHW has a P/B of 3.45.
These metrics, and several others, help RJF earn a Value grade of B, while SCHW has been given a Value grade of C.
RJF has seen stronger estimate revision activity and sports more attractive valuation metrics than SCHW, so it seems like value investors will conclude that RJF is the superior option right now.
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Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report