Investors interested in Banks - Midwest stocks are likely familiar with Heartland Financial (HTLF - Free Report) and First Financial Bancorp (FFBC - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Heartland Financial has a Zacks Rank of #2 (Buy), while First Financial Bancorp has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that HTLF likely has seen a stronger improvement to its earnings outlook than FFBC has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
HTLF currently has a forward P/E ratio of 10.75, while FFBC has a forward P/E of 10.90. We also note that HTLF has a PEG ratio of 1.08. 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. FFBC currently has a PEG ratio of 1.09.
Another notable valuation metric for HTLF is its P/B ratio of 1.17. 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, FFBC has a P/B of 1.18.
These are just a few of the metrics contributing to HTLF's Value grade of B and FFBC's Value grade of C.
HTLF stands above FFBC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HTLF is the superior value option right now.