Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Bilbao (BBVA - Free Report) or Westpac Banking Corporation (WBK - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Banco Bilbao is sporting a Zacks Rank of #2 (Buy), while Westpac Banking Corporation 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 BBVA has an improving earnings outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BBVA currently has a forward P/E ratio of 7.86, while WBK has a forward P/E of 12.78. We also note that BBVA has a PEG ratio of 3.38. 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. WBK currently has a PEG ratio of 8.52.
Another notable valuation metric for BBVA is its P/B ratio of 0.62. 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, WBK has a P/B of 1.43.
Based on these metrics and many more, BBVA holds a Value grade of B, while WBK has a Value grade of D.
BBVA has seen stronger estimate revision activity and sports more attractive valuation metrics than WBK, so it seems like value investors will conclude that BBVA is the superior option right now.