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CS vs. RY: Which Stock Is the Better Value Option?

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Investors interested in Banks - Foreign stocks are likely familiar with Credit Suisse and Royal Bank (RY - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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, Credit Suisse has a Zacks Rank of #1 (Strong Buy), while Royal Bank has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that CS likely has seen a stronger improvement to its earnings outlook than RY has recently. However, value investors will care about much more than just this.

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.

CS currently has a forward P/E ratio of 8.80, while RY has a forward P/E of 11.66. We also note that CS has a PEG ratio of 0.48. 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. RY currently has a PEG ratio of 2.25.

Another notable valuation metric for CS is its P/B ratio of 0.76. 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, RY has a P/B of 1.99.

These are just a few of the metrics contributing to CS's Value grade of B and RY's Value grade of C.

CS has seen stronger estimate revision activity and sports more attractive valuation metrics than RY, so it seems like value investors will conclude that CS is the superior option right now.


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