Investors interested in stocks from the Banks - West sector have probably already heard of Hope Bancorp (HOPE - Free Report) and Columbia Banking (COLB - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Hope Bancorp has a Zacks Rank of #2 (Buy), while Columbia Banking 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 HOPE has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
HOPE currently has a forward P/E ratio of 11.30, while COLB has a forward P/E of 16.14. We also note that HOPE has a PEG ratio of 1.13. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. COLB currently has a PEG ratio of 1.61.
Another notable valuation metric for HOPE is its P/B ratio of 1.18. 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, COLB has a P/B of 1.46.
These metrics, and several others, help HOPE earn a Value grade of A, while COLB has been given a Value grade of C.
HOPE 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 HOPE is likely the superior value option right now.