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SMFG vs. IBN: Which Stock Is the Better Value Option?

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Investors interested in Banks - Foreign stocks are likely familiar with Sumitomo Mitsui (SMFG - Free Report) and ICICI Bank Limited (IBN - Free Report) . 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 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.

Right now, Sumitomo Mitsui is sporting a Zacks Rank of #2 (Buy), while ICICI Bank Limited has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SMFG likely has seen a stronger improvement to its earnings outlook than IBN has recently. But this is just one factor that value investors are interested in.

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.

SMFG currently has a forward P/E ratio of 12.12, while IBN has a forward P/E of 18.45. We also note that SMFG has a PEG ratio of 0.87. 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. IBN currently has a PEG ratio of 2.24.

Another notable valuation metric for SMFG is its P/B ratio of 0.93. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, IBN has a P/B of 2.85.

These metrics, and several others, help SMFG earn a Value grade of B, while IBN has been given a Value grade of C.

SMFG stands above IBN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SMFG is the superior value option right now.


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