Investors with an interest in Banks - Midwest stocks have likely encountered both QCR Holdings (QCRH - Free Report) and First Merchants (FRME - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.
QCR Holdings has a Zacks Rank of #2 (Buy), while First Merchants has a Zacks Rank of #4 (Sell) right now. This means that QCRH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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 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.
QCRH currently has a forward P/E ratio of 10.10, while FRME has a forward P/E of 11.03. We also note that QCRH has a PEG ratio of 1.01. 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. FRME currently has a PEG ratio of 1.58.
Another notable valuation metric for QCRH is its P/B ratio of 1.11. 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, FRME has a P/B of 1.18.
These are just a few of the metrics contributing to QCRH's Value grade of A and FRME's Value grade of C.
QCRH stands above FRME thanks to its solid earnings outlook, and based on these valuation figures, we also feel that QCRH is the superior value option right now.