Investors looking for stocks in the Banks - Midwest sector might want to consider either TCF Financial (TCF - Free Report) or Macatawa Bank (MCBC - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, TCF Financial has a Zacks Rank of #2 (Buy), while Macatawa Bank has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TCF has an improving earnings outlook. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TCF currently has a forward P/E ratio of 10.28, while MCBC has a forward P/E of 12.46. We also note that TCF has a PEG ratio of 0.88. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MCBC currently has a PEG ratio of 1.56.
Another notable valuation metric for TCF is its P/B ratio of 1.36. 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, MCBC has a P/B of 1.75.
Based on these metrics and many more, TCF holds a Value grade of B, while MCBC has a Value grade of C.
TCF has seen stronger estimate revision activity and sports more attractive valuation metrics than MCBC, so it seems like value investors will conclude that TCF is the superior option right now.