Investors looking for stocks in the Banks - Midwest sector might want to consider either Macatawa Bank (MCBC - Free Report) or Commerce Bancshares (CBSH - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.
Macatawa Bank and Commerce Bancshares are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MCBC is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
MCBC currently has a forward P/E ratio of 12.74, while CBSH has a forward P/E of 16.37. We also note that MCBC has a PEG ratio of 1.59. 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. CBSH currently has a PEG ratio of 2.98.
Another notable valuation metric for MCBC is its P/B ratio of 1.84. 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, CBSH has a P/B of 2.31.
Based on these metrics and many more, MCBC holds a Value grade of B, while CBSH has a Value grade of D.
MCBC has seen stronger estimate revision activity and sports more attractive valuation metrics than CBSH, so it seems like value investors will conclude that MCBC is the superior option right now.