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NWG 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 NatWest Group (NWG - Free Report) or HDFC Bank (HDB - 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.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, NatWest Group has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NWG has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

NWG currently has a forward P/E ratio of 9.29, while HDB has a forward P/E of 21.19. We also note that NWG has a PEG ratio of 0.36. 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. HDB currently has a PEG ratio of 0.98.

Another notable valuation metric for NWG is its P/B ratio of 0.68. 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 3.45.

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

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


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