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Two major Canadian bank stocks, The Toronto-Dominion Bank (TD - Free Report) and Royal Bank of Canada (RY - Free Report) , headquartered in Toronto, have market capitalization of $80.3 billion and $90.8 billion, respectively. Both of these are part of the ‘Foreign Banks’ industry, which has a Zacks Industry Rank #62 (top 23%).
These two banks are listed on both the Toronto Stock Exchange and NYSE. On NYSE, Toronto-Dominion was up nearly 11%, while Royal Bank of Canada jumped over 14%, year-to date. While the business of both the banks is almost similar, let’s dig deeper into to the financials, before deciding which one is a better investment option.
Toronto-Dominion
Toronto-Dominion – founded in 1855 – provides various retail and commercial banking products and services in Canada, the U.S. and internationally. The company operates through Canadian Retail, U.S. Retail, and Wholesale Banking segments.
Toronto-Dominion has a beta of 0.98, indicating it is slightly less volatile than the market. Further, the company has a trailing 12-month Return on Equity (ROE) of 13.3%, compared with the industry average of 10.6%. This shows it reinvests its earnings more efficiently.
Further, Toronto-Dominion stock looks a little bit overvalued with respect to its Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. It has a P/E ratio of 11.69, compared with the industry average of 10.95. Also, the company’s P/B ratio of 1.55 is above the industry average of 0.91.
Additionally, Toronto-Dominion has a dividend yield of 3.93%. However, the bank’s current year earnings are projected to decline 0.5%, while sales is expected to fall 1.4%.
Nevertheless, analysts seem optimistic about the stock’s earnings performance. Over the last 30 days, the stock has witnessed three upward revisions (against no downward revision) for fiscal 2016 and fiscal 2017. The Zacks Consensus Estimate rose 1.9% to $3.70 for fiscal 2016 and 1% to $3.92 for fiscal 2017.
Toronto-Dominion carries a Zacks Rank #2 (Buy) and has a VGM Score of ‘B.’ Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Founded in 1864, Royal Bank of Canada, together with its subsidiaries, operates as a diversified financial service company worldwide. The company operates through these segments: Personal & Commercial Banking; Wealth Management; Insurance; Investor & Treasury Services; and Capital Markets.
Royal Bank of Canada has a beta of 1.17, indicating it is 17% more volatile than the market. Further, the company has a trailing 12-month ROE of 15.37%, compared with the industry average of 10.6%. This shows it reinvests its earnings more efficiently.
Further, Royal Bank of Canada stock looks overvalued with respect to its P/E and P/B ratios. It has a P/E ratio of 11.74, compared with the industry average of 10.95. Also, the company’s P/B of 1.88 is above the industry average of 0.91.
Additionally, Royal Bank of Canada has a dividend yield of 4.10%. Further, the bank’s earnings for the current fiscal year are projected to be 3.1%, while sales growth is estimated to be 2.9%.
Moreover, analysts seem optimistic about the stock’s earnings prospects. Over the last 30 days, the stock has witnessed three upward revisions (against no downward revisions) for fiscal 2016 and fiscal 2017. The Zacks Consensus Estimate edged up nearly 1% to $5.20 for fiscal 2016 and increased 1.3% to $5.46 for fiscal 2017.
Royal Bank of Canada carries a Zacks Rank #2 with a VGM Score of ‘C.’
Both Toronto-Dominion and Royal Bank of Canada stocks look overvalued at the current prices.
While Royal Bank of Canada looks better positioned in terms of dividend yield, ROE and growth expectations, Toronto-Dominion’s less volatility compared with the market, along with a Zacks Rank #2 and VGM Score of ‘B,’ makes it a better pick.
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Canadian Bank Stocks Head to Head: TD versus RY
Two major Canadian bank stocks, The Toronto-Dominion Bank (TD - Free Report) and Royal Bank of Canada (RY - Free Report) , headquartered in Toronto, have market capitalization of $80.3 billion and $90.8 billion, respectively. Both of these are part of the ‘Foreign Banks’ industry, which has a Zacks Industry Rank #62 (top 23%).
These two banks are listed on both the Toronto Stock Exchange and NYSE. On NYSE, Toronto-Dominion was up nearly 11%, while Royal Bank of Canada jumped over 14%, year-to date. While the business of both the banks is almost similar, let’s dig deeper into to the financials, before deciding which one is a better investment option.
Toronto-Dominion
Toronto-Dominion – founded in 1855 – provides various retail and commercial banking products and services in Canada, the U.S. and internationally. The company operates through Canadian Retail, U.S. Retail, and Wholesale Banking segments.
Toronto-Dominion has a beta of 0.98, indicating it is slightly less volatile than the market. Further, the company has a trailing 12-month Return on Equity (ROE) of 13.3%, compared with the industry average of 10.6%. This shows it reinvests its earnings more efficiently.
Further, Toronto-Dominion stock looks a little bit overvalued with respect to its Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. It has a P/E ratio of 11.69, compared with the industry average of 10.95. Also, the company’s P/B ratio of 1.55 is above the industry average of 0.91.
Additionally, Toronto-Dominion has a dividend yield of 3.93%. However, the bank’s current year earnings are projected to decline 0.5%, while sales is expected to fall 1.4%.
Nevertheless, analysts seem optimistic about the stock’s earnings performance. Over the last 30 days, the stock has witnessed three upward revisions (against no downward revision) for fiscal 2016 and fiscal 2017. The Zacks Consensus Estimate rose 1.9% to $3.70 for fiscal 2016 and 1% to $3.92 for fiscal 2017.
Toronto-Dominion carries a Zacks Rank #2 (Buy) and has a VGM Score of ‘B.’ Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
TORONTO DOM BNK Price and Consensus
TORONTO DOM BNK Price and Consensus | TORONTO DOM BNK Quote
Royal Bank of Canada
Founded in 1864, Royal Bank of Canada, together with its subsidiaries, operates as a diversified financial service company worldwide. The company operates through these segments: Personal & Commercial Banking; Wealth Management; Insurance; Investor & Treasury Services; and Capital Markets.
Royal Bank of Canada has a beta of 1.17, indicating it is 17% more volatile than the market. Further, the company has a trailing 12-month ROE of 15.37%, compared with the industry average of 10.6%. This shows it reinvests its earnings more efficiently.
Further, Royal Bank of Canada stock looks overvalued with respect to its P/E and P/B ratios. It has a P/E ratio of 11.74, compared with the industry average of 10.95. Also, the company’s P/B of 1.88 is above the industry average of 0.91.
Additionally, Royal Bank of Canada has a dividend yield of 4.10%. Further, the bank’s earnings for the current fiscal year are projected to be 3.1%, while sales growth is estimated to be 2.9%.
Moreover, analysts seem optimistic about the stock’s earnings prospects. Over the last 30 days, the stock has witnessed three upward revisions (against no downward revisions) for fiscal 2016 and fiscal 2017. The Zacks Consensus Estimate edged up nearly 1% to $5.20 for fiscal 2016 and increased 1.3% to $5.46 for fiscal 2017.
Royal Bank of Canada carries a Zacks Rank #2 with a VGM Score of ‘C.’
ROYAL BANK CDA Price and Consensus
ROYAL BANK CDA Price and Consensus | ROYAL BANK CDA Quote
Conclusion
Both Toronto-Dominion and Royal Bank of Canada stocks look overvalued at the current prices.
While Royal Bank of Canada looks better positioned in terms of dividend yield, ROE and growth expectations, Toronto-Dominion’s less volatility compared with the market, along with a Zacks Rank #2 and VGM Score of ‘B,’ makes it a better pick.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>