Investors with an interest in Banks - Southwest stocks have likely encountered both First Foundation (FFWM - Free Report) and BancFirst (BANF - 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
First Foundation and BancFirst are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that FFWM likely has seen a stronger improvement to its earnings outlook than BANF has recently. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
FFWM currently has a forward P/E ratio of 11.05, while BANF has a forward P/E of 13.76. We also note that FFWM has a PEG ratio of 1.58. 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. BANF currently has a PEG ratio of 1.97.
Another notable valuation metric for FFWM is its P/B ratio of 1.18. 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, BANF has a P/B of 1.93.
These metrics, and several others, help FFWM earn a Value grade of B, while BANF has been given a Value grade of D.
FFWM stands above BANF thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FFWM is the superior value option right now.