Investors interested in stocks from the Banks - Southeast sector have probably already heard of State Bank Financial (STBZ - Free Report) and City Holding (CHCO - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, State Bank Financial has a Zacks Rank of #2 (Buy), while City Holding has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STBZ 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 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.
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.
STBZ currently has a forward P/E ratio of 12.92, while CHCO has a forward P/E of 15.13. We also note that STBZ has a PEG ratio of 0.96. 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. CHCO currently has a PEG ratio of 1.89.
Another notable valuation metric for STBZ is its P/B ratio of 1.68. 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, CHCO has a P/B of 2.26.
Based on these metrics and many more, STBZ holds a Value grade of B, while CHCO has a Value grade of C.
STBZ 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 STBZ is likely the superior value option right now.