Investors interested in stocks from the Banks - Foreign sector have probably already heard of OneSavings Bank PLC (OSVBF - Free Report) and Royal Bank (RY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.
OneSavings Bank PLC has a Zacks Rank of #2 (Buy), while Royal Bank has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that OSVBF is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
OSVBF currently has a forward P/E ratio of 7.64, while RY has a forward P/E of 10.56. We also note that OSVBF has a PEG ratio of 1.09. 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. RY currently has a PEG ratio of 1.38.
Another notable valuation metric for OSVBF is its P/B ratio of 1.59. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RY has a P/B of 1.92.
These are just a few of the metrics contributing to OSVBF's Value grade of A and RY's Value grade of C.
OSVBF stands above RY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that OSVBF is the superior value option right now.