Investors looking for stocks in the Banks - Foreign sector might want to consider either ING Groep (ING) or DBS Group Holdings Ltd (DBSDY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Both ING Groep and DBS Group Holdings Ltd have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ING currently has a forward P/E ratio of 7.42, while DBSDY has a forward P/E of 8.34. We also note that ING has a PEG ratio of 0.27. 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. DBSDY currently has a PEG ratio of 1.12.
Another notable valuation metric for ING is its P/B ratio of 0.81. 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, DBSDY has a P/B of 1.45.
Based on these metrics and many more, ING holds a Value grade of B, while DBSDY has a Value grade of D.
Both ING and DBSDY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ING is 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