Investors interested in stocks from the Banks - Southeast sector have probably already heard of First Horizon National (FHN - Free Report) and First Bancorp (FBNC - 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, First Horizon National has a Zacks Rank of #2 (Buy), while First Bancorp has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that FHN likely has seen a stronger improvement to its earnings outlook than FBNC has recently. However, value investors will care about much more than just this.
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.
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.
FHN currently has a forward P/E ratio of 9.93, while FBNC has a forward P/E of 11.47. We also note that FHN has a PEG ratio of 2.01. 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. FBNC currently has a PEG ratio of 2.44.
Another notable valuation metric for FHN is its P/B ratio of 1.01. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, FBNC has a P/B of 1.35.
Based on these metrics and many more, FHN holds a Value grade of A, while FBNC has a Value grade of C.
FHN has seen stronger estimate revision activity and sports more attractive valuation metrics than FBNC, so it seems like value investors will conclude that FHN is the superior option right now.