Investors interested in Banks - Foreign stocks are likely familiar with Shinhan Financial (SHG - Free Report) and Banco Bilbao (BBVA - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Currently, Shinhan Financial has a Zacks Rank of #1 (Strong Buy), while Banco Bilbao has a Zacks Rank of #4 (Sell). This means that SHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
SHG currently has a forward P/E ratio of 5.60, while BBVA has a forward P/E of 7.88. We also note that SHG has a PEG ratio of 0.68. 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. BBVA currently has a PEG ratio of 1.09.
Another notable valuation metric for SHG is its P/B ratio of 0.54. 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, BBVA has a P/B of 0.64.
These are just a few of the metrics contributing to SHG's Value grade of A and BBVA's Value grade of C.
SHG 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 SHG is likely the superior value option right now.