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BAP vs. HDB: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Banks - Foreign stocks have likely encountered both Credicorp (BAP - Free Report) and HDFC Bank (HDB - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.

Currently, Credicorp has a Zacks Rank of #1 (Strong Buy), while HDFC Bank has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BAP has an improving earnings outlook. 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 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.

BAP currently has a forward P/E ratio of 9.12, while HDB has a forward P/E of 20.80. We also note that BAP has a PEG ratio of 0.54. 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. HDB currently has a PEG ratio of 1.64.

Another notable valuation metric for BAP is its P/B ratio of 1.50. 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, HDB has a P/B of 1.89.

These metrics, and several others, help BAP earn a Value grade of B, while HDB has been given a Value grade of D.

BAP has seen stronger estimate revision activity and sports more attractive valuation metrics than HDB, so it seems like value investors will conclude that BAP is the superior option right now.


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