Investors looking for stocks in the Banks - West sector might want to consider either First Hawaiian (FHB - Free Report) or First Republic Bank (FRC - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
First Hawaiian and First Republic Bank are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that FHB likely has seen a stronger improvement to its earnings outlook than FRC has recently. But this is only part of the picture 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FHB currently has a forward P/E ratio of 13.87, while FRC has a forward P/E of 20.71. We also note that FHB has a PEG ratio of 1.45. 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. FRC currently has a PEG ratio of 1.69.
Another notable valuation metric for FHB is its P/B ratio of 1.57. 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, FRC has a P/B of 2.19.
Based on these metrics and many more, FHB holds a Value grade of B, while FRC has a Value grade of D.
FHB has seen stronger estimate revision activity and sports more attractive valuation metrics than FRC, so it seems like value investors will conclude that FHB is the superior option right now.