Back to top

Image: Bigstock

BMO vs. ITUB: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors looking for stocks in the Banks - Foreign sector might want to consider either Bank of Montreal (BMO) or Banco Itau (ITUB). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Bank of Montreal and Banco Itau are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that BMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

BMO currently has a forward P/E ratio of 10.27, while ITUB has a forward P/E of 10.43. We also note that BMO has a PEG ratio of 2. 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. ITUB currently has a PEG ratio of 2.28.

Another notable valuation metric for BMO is its P/B ratio of 1.43. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ITUB has a P/B of 2.12.

These metrics, and several others, help BMO earn a Value grade of B, while ITUB has been given a Value grade of C.

BMO sticks out from ITUB in both our Zacks Rank and Style Scores models, so value investors will likely feel that BMO is the better option right now.

Published in