Investors looking for stocks in the Banks - Midwest sector might want to consider either Chemical Financial (CHFC - Free Report) or Civista Bancshares (CIVB - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Chemical Financial and Civista Bancshares are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
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 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.
CHFC currently has a forward P/E ratio of 13.62, while CIVB has a forward P/E of 14.09. We also note that CHFC has a PEG ratio of 1.51. 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. CIVB currently has a PEG ratio of 1.76.
Another notable valuation metric for CHFC is its P/B ratio of 1.40. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CIVB has a P/B of 1.48.
Based on these metrics and many more, CHFC holds a Value grade of B, while CIVB has a Value grade of C.
Both CHFC and CIVB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CHFC is the superior value option right now.