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

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Investors with an interest in Banks - Foreign stocks have likely encountered both Sumitomo Mitsui (SMFG - Free Report) and HDFC Bank (HDB - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Sumitomo Mitsui and HDFC Bank are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SMFG is likely seeing its earnings outlook improve to a greater extent. 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.

SMFG currently has a forward P/E ratio of 7.53, while HDB has a forward P/E of 22.19. We also note that SMFG has a PEG ratio of 0.41. 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 1.02.

Another notable valuation metric for SMFG is its P/B ratio of 0.43. 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 3.52.

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

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


In-Depth Zacks Research for the Tickers Above


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HDFC Bank Limited (HDB) - free report >>

Sumitomo Mitsui Financial Group Inc (SMFG) - free report >>

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