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BMO vs. HDB: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Banks - Foreign sector might want to consider either Bank of Montreal (BMO - Free Report) or HDFC Bank (HDB - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Bank of Montreal has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #4 (Sell). This means that BMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

BMO currently has a forward P/E ratio of 10.79, while HDB has a forward P/E of 25.02. We also note that BMO has a PEG ratio of 0.96. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HDB currently has a PEG ratio of 1.14.

Another notable valuation metric for BMO is its P/B ratio of 1.65. 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, HDB has a P/B of 4.03.

These metrics, and several others, help BMO earn a Value grade of B, while HDB has been given a Value grade of C.

BMO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BMO is likely the superior value option right now.


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