Investors interested in stocks from the Banks - West sector have probably already heard of East West Bancorp (EWBC - Free Report) and Bank of Hawaii (BOH - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
East West Bancorp has a Zacks Rank of #2 (Buy), while Bank of Hawaii has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EWBC has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
EWBC currently has a forward P/E ratio of 14.44, while BOH has a forward P/E of 16.37. We also note that EWBC has a PEG ratio of 1.38. 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. BOH currently has a PEG ratio of 1.93.
Another notable valuation metric for EWBC is its P/B ratio of 2.46. 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, BOH has a P/B of 2.93.
These metrics, and several others, help EWBC earn a Value grade of B, while BOH has been given a Value grade of C.
EWBC has seen stronger estimate revision activity and sports more attractive valuation metrics than BOH, so it seems like value investors will conclude that EWBC is the superior option right now.