Back to top

Image: Bigstock

HSBC vs. DBSDY: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in stocks from the Banks - Foreign sector have probably already heard of HSBC (HSBC - Free Report) and DBS Group Holdings Ltd (DBSDY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, HSBC has a Zacks Rank of #2 (Buy), while DBS Group Holdings Ltd has a Zacks Rank of #3 (Hold). This means that HSBC'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 are also interested in a number of tried-and-true valuation metrics that help show when 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.

HSBC currently has a forward P/E ratio of 9.79, while DBSDY has a forward P/E of 10.93. We also note that HSBC has a PEG ratio of 0.46. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DBSDY currently has a PEG ratio of 0.82.

Another notable valuation metric for HSBC is its P/B ratio of 0.62. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DBSDY has a P/B of 1.33.

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

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

In-Depth Zacks Research for the Tickers Above

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

DBS Group Holdings Ltd (DBSDY) - free report >>

HSBC Holdings plc (HSBC) - free report >>

Published in