Investors looking for stocks in the Banks - Foreign sector might want to consider either Bank of Montreal (BMO - Free Report) or Westpac Banking Corporation (WBK - 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.
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.
Currently, Bank of Montreal has a Zacks Rank of #2 (Buy), while Westpac Banking Corporation has a Zacks Rank of #3 (Hold). This means that BMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BMO currently has a forward P/E ratio of 10.27, while WBK has a forward P/E of 13.74. We also note that BMO has a PEG ratio of 2.11. 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. WBK currently has a PEG ratio of 9.16.
Another notable valuation metric for BMO is its P/B ratio of 1.39. 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, WBK has a P/B of 1.48.
Based on these metrics and many more, BMO holds a Value grade of B, while WBK has a Value grade of C.
BMO stands above WBK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BMO is the superior value option right now.