Investors with an interest in Banks - Midwest stocks have likely encountered both First Business Financial Services (FBIZ - Free Report) and Lakeland Financial (LKFN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.
First Business Financial Services and Lakeland Financial are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that FBIZ'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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FBIZ currently has a forward P/E ratio of 9.49, while LKFN has a forward P/E of 13.66. We also note that FBIZ has a PEG ratio of 1.19. 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. LKFN currently has a PEG ratio of 1.37.
Another notable valuation metric for FBIZ is its P/B ratio of 1.10. 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, LKFN has a P/B of 2.01.
These metrics, and several others, help FBIZ earn a Value grade of B, while LKFN has been given a Value grade of C.
FBIZ stands above LKFN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FBIZ is the superior value option right now.