Investors interested in Banks - Southeast stocks are likely familiar with Customers Bancorp (CUBI - Free Report) and First Horizon National (FHN - 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Customers Bancorp and First Horizon National are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CUBI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
CUBI currently has a forward P/E ratio of 10.42, while FHN has a forward P/E of 12.14. We also note that CUBI has a PEG ratio of 1.04. 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. FHN currently has a PEG ratio of 1.73.
Another notable valuation metric for CUBI is its P/B ratio of 1.30. 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, FHN has a P/B of 1.31.
Based on these metrics and many more, CUBI holds a Value grade of A, while FHN has a Value grade of C.
CUBI stands above FHN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CUBI is the superior value option right now.