Investors interested in Banks – Midwest stocks are likely familiar with First Business Financial Services (FBIZ) and Lakeland Financial (LKFN). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, First Business Financial Services is sporting a Zacks Rank of #2 (Buy), while Lakeland Financial has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FBIZ has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
FBIZ currently has a forward P/E ratio of 10.08, while LKFN has a forward P/E of 13.93. We also note that FBIZ has a PEG ratio of 1.26. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. LKFN currently has a PEG ratio of 1.39.
Another notable valuation metric for FBIZ is its P/B ratio of 1.02. 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, LKFN has a P/B of 2.32.
Based on these metrics and many more, FBIZ holds a Value grade of B, while LKFN has a Value grade of C.
FBIZ sticks out from LKFN in both our Zacks Rank and Style Scores models, so value investors will likely feel that FBIZ is the better option right now.
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