Investors interested in Banks - Foreign stocks are likely familiar with Bank of Nova Scotia (BNS) and Bank of Montreal (BMO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Bank of Nova Scotia has a Zacks Rank of #1 (Strong Buy), while Bank of Montreal has a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that BNS likely has seen a stronger improvement to its earnings outlook than BMO has recently. But this is only part of the picture 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BNS currently has a forward P/E ratio of 9.81, while BMO has a forward P/E of 10.10. We also note that BNS has a PEG ratio of 1.53. 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. BMO currently has a PEG ratio of 1.70.
Another notable valuation metric for BNS is its P/B ratio of 1.39. 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, BMO has a P/B of 1.45.
These are just a few of the metrics contributing to BNS's Value grade of B and BMO's Value grade of D.
BNS has seen stronger estimate revision activity and sports more attractive valuation metrics than BMO, so it seems like value investors will conclude that BNS is the superior option right now.
Bank of Nova Scotia (The) (BNS): Free Stock Analysis Report
Bank Of Montreal (BMO): Free Stock Analysis Report
Original post