Investors with an interest in Banks - Midwest stocks have likely encountered both Old National Bancorp (ONB - Free Report) and First Midwest Bancorp (FMBI - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 First Midwest Bancorp has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ONB has an improving earnings 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.
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.
ONB currently has a forward P/E ratio of 14.79, while FMBI has a forward P/E of 16.10. We also note that ONB has a PEG ratio of 1.85. 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 2.30.
Another notable valuation metric for ONB is its P/B ratio of 1.34. 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, FMBI has a P/B of 1.47.
These metrics, and several others, help ONB earn a Value grade of B, while FMBI has been given a Value grade of C.
ONB is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ONB is likely the superior value option right now.