Investors looking for stocks in the Banks - Midwest sector might want to consider either Old National Bancorp (ONB - Free Report) or Macatawa Bank (MCBC - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Old National Bancorp has a Zacks Rank of #2 (Buy), while Macatawa Bank has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ONB is likely seeing its earnings outlook improve to a greater extent. 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ONB currently has a forward P/E ratio of 15.08, while MCBC has a forward P/E of 15.97. We also note that ONB has a PEG ratio of 1.88. 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. MCBC currently has a PEG ratio of 2.
Another notable valuation metric for ONB is its P/B ratio of 1.35. 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, MCBC has a P/B of 2.36.
Based on these metrics and many more, ONB holds a Value grade of B, while MCBC has a Value grade of C.
ONB sticks out from MCBC in both our Zacks Rank and Style Scores models, so value investors will likely feel that ONB is the better option right now.