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BCS vs. CM: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Banks - Foreign sector might want to consider either Barclays (BCS - Free Report) or Canadian Imperial Bank (CM - 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, Barclays has a Zacks Rank of #2 (Buy), while Canadian Imperial Bank has a Zacks Rank of #3 (Hold). This means that BCS'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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BCS currently has a forward P/E ratio of 4.88, while CM has a forward P/E of 8.41. We also note that BCS has a PEG ratio of 0.16. 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. CM currently has a PEG ratio of 2.60.
Another notable valuation metric for BCS is its P/B ratio of 0.38. 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, CM has a P/B of 1.26.
Based on these metrics and many more, BCS holds a Value grade of A, while CM has a Value grade of C.
BCS 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 BCS is likely the superior value option right now.