Investors with an interest in Banks – Foreign stocks have likely encountered both Toronto-Dominion Bank (TD) and Banco Santander-Chile (BSAC). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Toronto-Dominion Bank and Banco Santander-Chile 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 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.
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.
TD currently has a forward P/E ratio of 11.81, while BSAC has a forward P/E of 15.73. We also note that TD has a PEG ratio of 1.05. 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. BSAC currently has a PEG ratio of 1.27.
Another notable valuation metric for TD is its P/B ratio of 1.91. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BSAC has a P/B of 2.78.
These are just a few of the metrics contributing to TD's Value grade of B and BSAC's Value grade of D.
TD and BSAC are both solid stocks with improving earnings outlooks, but based on the above valuation figures, it seems like value investors will conclude that TD is the superior option right now.
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