Investors interested in stocks from the Banks - Foreign sector have probably already heard of Deutsche Bank (DB) and HDFC Bank (HDB). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Deutsche Bank and HDFC Bank are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
DB currently has a forward P/E ratio of 5.22, while HDB has a forward P/E of 18.49. We also note that DB has a PEG ratio of 0.60. 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. HDB currently has a PEG ratio of 0.96.
Another notable valuation metric for DB is its P/B ratio of 0.28. 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, HDB has a P/B of 3.30.
Based on these metrics and many more, DB holds a Value grade of A, while HDB has a Value grade of C.
Both DB and HDB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DB is the superior value option right now.
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