Investors looking for stocks in the Banks - Southeast sector might want to consider either F.N.B. (FNB - Free Report) or Triumph Bancorp (TBK - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
F.N.B. has a Zacks Rank of #2 (Buy), while Triumph Bancorp has a Zacks Rank of #4 (Sell) right now. This means that FNB'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 analyze a variety of traditional, tried-and-true metrics to help find companies 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.
FNB currently has a forward P/E ratio of 10.97, while TBK has a forward P/E of 16.06. We also note that FNB has a PEG ratio of 1.22. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TBK currently has a PEG ratio of 1.34.
Another notable valuation metric for FNB is its P/B ratio of 0.88. 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, TBK has a P/B of 1.53.
These metrics, and several others, help FNB earn a Value grade of A, while TBK has been given a Value grade of C.
FNB has seen stronger estimate revision activity and sports more attractive valuation metrics than TBK, so it seems like value investors will conclude that FNB is the superior option right now.