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Investors interested in stocks from the Banks - Foreign sector have probably already heard of HSBC (HSBC) and DNB Bank ASA (DNBBY). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
HSBC has a Zacks Rank of #2 (Buy), while DNB Bank ASA has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that HSBC likely has seen a stronger improvement to its earnings outlook than DNBBY has recently. But this is only part of the picture 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.
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.
HSBC currently has a forward P/E ratio of 9.99, while DNBBY has a forward P/E of 10.28. We also note that HSBC has a PEG ratio of 0.47. 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. DNBBY currently has a PEG ratio of 1.08.
Another notable valuation metric for HSBC is its P/B ratio of 0.62. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, DNBBY has a P/B of 0.98.
These metrics, and several others, help HSBC earn a Value grade of B, while DNBBY has been given a Value grade of F.
HSBC sticks out from DNBBY in both our Zacks Rank and Style Scores models, so value investors will likely feel that HSBC is the better option right now.
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HSBC Holdings plc (HSBC) : Free Stock Analysis Report
DNB Bank ASA (DNBBY) : Free Stock Analysis Report
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