Investors looking for stocks in the Banks - Midwest sector might want to consider either Associated Banc-Corp (ASB - Free Report) or First Midwest Bancorp (FMBI - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Associated Banc-Corp and First Midwest Bancorp are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
ASB currently has a forward P/E ratio of 13.48, while FMBI has a forward P/E of 16.03. We also note that ASB has a PEG ratio of 1.93. 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. FMBI currently has a PEG ratio of 2.29.
Another notable valuation metric for ASB is its P/B ratio of 1.31. 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, FMBI has a P/B of 1.46.
These metrics, and several others, help ASB earn a Value grade of B, while FMBI has been given a Value grade of F.
Both ASB and FMBI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ASB is the superior value option right now.