Investors interested in Banks - West stocks are likely familiar with East West Bancorp (EWBC - Free Report) and First Republic Bank (FRC - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
East West Bancorp has a Zacks Rank of #2 (Buy), while First Republic Bank has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EWBC has an improving earnings outlook. But this is only part of the picture 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.
EWBC currently has a forward P/E ratio of 9.94, while FRC has a forward P/E of 21.29. We also note that EWBC has a PEG ratio of 0.99. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FRC currently has a PEG ratio of 2.86.
Another notable valuation metric for EWBC is its P/B ratio of 1.37. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FRC has a P/B of 2.21.
These metrics, and several others, help EWBC earn a Value grade of A, while FRC has been given a Value grade of C.
EWBC has seen stronger estimate revision activity and sports more attractive valuation metrics than FRC, so it seems like value investors will conclude that EWBC is the superior option right now.