Investors looking for stocks in the Banks - Southeast sector might want to consider either First Horizon National (FHN - Free Report) or 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both First Horizon National and First Bancorp have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 10.64, while FBNC has a forward P/E of 12.19. We also note that FHN has a PEG ratio of 1.85. 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 3.69.
Another notable valuation metric for FHN is its P/B ratio of 1.09. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, FBNC has a P/B of 1.41.
These metrics, and several others, help FHN earn a Value grade of B, while FBNC has been given a Value grade of C.
Both FHN and FBNC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FHN is the superior value option right now.