Investors interested in stocks from the Banks - Foreign sector have probably already heard of KB Financial (KB) and Sumitomo Mitsui (SMFG). But which of these two companies is the best option for those looking for undervalued stocks? 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.
KB Financial and Sumitomo Mitsui are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
KB currently has a forward P/E ratio of 4.23, while SMFG has a forward P/E of 11.56. We also note that KB has a PEG ratio of 0.34. 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. SMFG currently has a PEG ratio of 2.17.
Another notable valuation metric for KB is its P/B ratio of 0.37. 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, SMFG has a P/B of 0.69.
These metrics, and several others, help KB earn a Value grade of A, while SMFG has been given a Value grade of C.
Both KB and SMFG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KB is the superior value option right now.
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