Investors interested in stocks from the Banks - Foreign sector have probably already heard of HSBC (HSBC) and Toronto-Dominion Bank (TD). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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, HSBC is sporting a Zacks Rank of #2 (Buy), while Toronto-Dominion Bank has a Zacks Rank of #4 (Sell). This means that HSBC'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.

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.

HSBC currently has a forward P/E ratio of 8.37, while TD has a forward P/E of 10.89. We also note that HSBC has a PEG ratio of 1.04. 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. TD currently has a PEG ratio of 1.48.

Another notable valuation metric for HSBC is its P/B ratio of 1.04. 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, TD has a P/B of 1.36.

These are just a few of the metrics contributing to HSBC's Value grade of B and TD's Value grade of D.

HSBC has seen stronger estimate revision activity and sports more attractive valuation metrics than TD, so it seems like value investors will conclude that HSBC is the superior option right now.

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HSBC Holdings plc (HSBC) : Free Stock Analysis Report

Toronto Dominion Bank (The) (TD) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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