Investors with an interest in Banks - Southeast stocks have likely encountered both First Horizon National (FHN - Free Report) and First Bancorp (FBNC - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Currently, First Horizon National has a Zacks Rank of #1 (Strong Buy), while First Bancorp has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FHN is likely seeing its earnings outlook improve to a greater extent. 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 10.35, while FBNC has a forward P/E of 11.81. We also note that FHN has a PEG ratio of 2.09. 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. FBNC currently has a PEG ratio of 2.51.
Another notable valuation metric for FHN is its P/B ratio of 1.06. 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 1.36.
These are just a few of the metrics contributing to FHN's Value grade of B and FBNC's Value grade of C.
FHN 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 FHN is likely the superior value option right now.