Investors interested in Financial - Investment Bank stocks are likely familiar with Nomura Holdings (NMR) and Bank of America (BAC). 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.
Nomura Holdings has a Zacks Rank of #2 (Buy), while Bank of America has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NMR is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
NMR currently has a forward P/E ratio of 8.67, while BAC has a forward P/E of 11.93. We also note that NMR has a PEG ratio of 0.30. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BAC currently has a PEG ratio of 1.19.
Another notable valuation metric for NMR is its P/B ratio of 0.81. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BAC has a P/B of 1.24.
These are just a few of the metrics contributing to NMR's Value grade of A and BAC's Value grade of D.
NMR is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NMR is likely the superior value option right now.
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Bank of America Corporation (BAC) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
