Investors with an interest in Banks - Foreign stocks have likely encountered both NatWest Group (NWG) and United Overseas Bank Ltd. (UOVEY). 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 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.
NatWest Group has a Zacks Rank of #1 (Strong Buy), while United Overseas Bank Ltd. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that NWG likely has seen a stronger improvement to its earnings outlook than UOVEY has recently. But this is only part of the picture for value investors.
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.
NWG currently has a forward P/E ratio of 7.21, while UOVEY has a forward P/E of 10.12. We also note that NWG has a PEG ratio of 0.71. 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. UOVEY currently has a PEG ratio of 1.92.
Another notable valuation metric for NWG is its P/B ratio of 0.82. 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, UOVEY has a P/B of 1.35.
These metrics, and several others, help NWG earn a Value grade of B, while UOVEY has been given a Value grade of D.
NWG 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 NWG is likely the superior value option right now.
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