Investors looking for stocks in the Banks – Northeast sector might want to consider either TCF Financial (TCF) or Signature Bank (SBNY). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
TCF Financial and Signature Bank are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TCF is likely seeing its earnings outlook improve to a greater extent. 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.
TCF currently has a forward P/E ratio of 15.94, while SBNY has a forward P/E of 18.85. We also note that TCF has a PEG ratio of 1.62. 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. SBNY currently has a PEG ratio of 1.98.
Another notable valuation metric for TCF is its P/B ratio of 1.32. 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, SBNY has a P/B of 2.10.
These metrics, and several others, help TCF earn a Value grade of B, while SBNY has been given a Value grade of C.
TCF has seen stronger estimate revision activity and sports more attractive valuation metrics than SBNY, so it seems like value investors will conclude that TCF is the superior option right now.
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