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BBD vs. HDB: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Bradesco (BBD - Free Report) or 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.

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.

Banco Bradesco has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold) right now. This means that BBD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

BBD currently has a forward P/E ratio of 7.10, while HDB has a forward P/E of 21.77. We also note that BBD has a PEG ratio of 0.40. 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 1.68.

Another notable valuation metric for BBD is its P/B ratio of 0.99. 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 2.81.

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

BBD stands above HDB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBD is the superior value option right now.


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