Back to top

Image: Bigstock

TD vs. HDB: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in Banks - Foreign stocks are likely familiar with Toronto-Dominion Bank (TD - Free Report) and HDFC Bank (HDB - Free Report) . 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 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 Toronto-Dominion Bank and HDFC Bank are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

TD currently has a forward P/E ratio of 12.50, while HDB has a forward P/E of 35.19. We also note that TD has a PEG ratio of 1.46. 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. HDB currently has a PEG ratio of 1.48.

Another notable valuation metric for TD is its P/B ratio of 1.61. 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, HDB has a P/B of 5.54.

Based on these metrics and many more, TD holds a Value grade of B, while HDB has a Value grade of F.

Both TD and HDB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TD is the superior value option right now.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Toronto Dominion Bank The (TD) - free report >>

HDFC Bank Limited (HDB) - free report >>

Published in