Investors looking for stocks in the Banks - Northeast sector might want to consider either Midland States Bancorp (MSBI - Free Report) or Webster Financial (WBS - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Midland States Bancorp and Webster Financial have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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.
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.
MSBI currently has a forward P/E ratio of 15.07, while WBS has a forward P/E of 18.94. We also note that MSBI has a PEG ratio of 2.15. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WBS currently has a PEG ratio of 2.37.
Another notable valuation metric for MSBI is its P/B ratio of 1.45. 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, WBS has a P/B of 2.41.
Based on these metrics and many more, MSBI holds a Value grade of B, while WBS has a Value grade of D.
Both MSBI and WBS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MSBI is the superior value option right now.