Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Santander-Brazil (BSBR - Free Report) and Banco Santander-Chile (BSAC - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Banco Santander-Brazil has a Zacks Rank of #2 (Buy), while Banco Santander-Chile has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BSBR is likely seeing its earnings outlook improve to a greater extent. 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.
BSBR currently has a forward P/E ratio of 11.87, while BSAC has a forward P/E of 15.28. We also note that BSBR has a PEG ratio of 1.14. 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. BSAC currently has a PEG ratio of 1.28.
Another notable valuation metric for BSBR is its P/B ratio of 1.79. 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, BSAC has a P/B of 2.69.
These metrics, and several others, help BSBR earn a Value grade of A, while BSAC has been given a Value grade of F.
BSBR 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 BSBR is likely the superior value option right now.