Investors with an interest in Banks - Foreign stocks have likely encountered both The Bank of East Asia Ltd. (BKEAY) and National Australia Bank Ltd. (NABZY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, The Bank of East Asia Ltd. is sporting a Zacks Rank of #2 (Buy), while National Australia Bank Ltd. has a Zacks Rank of #3 (Hold). This means that BKEAY'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 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.
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.
BKEAY currently has a forward P/E ratio of 4.25, while NABZY has a forward P/E of 10.41. We also note that BKEAY has a PEG ratio of 0.19. 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. NABZY currently has a PEG ratio of 1.73.
Another notable valuation metric for BKEAY is its P/B ratio of 0.26. 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, NABZY has a P/B of 1.24.
These are just a few of the metrics contributing to BKEAY's Value grade of A and NABZY's Value grade of D.
BKEAY 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 BKEAY is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report