Should Value Investors Buy These Bank Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to...
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is First Bancorp FBP. FBP is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 9.93. This compares to its industry's average Forward P/E of 12.17. FBP's Forward P/E has been as high as 11.80 and as low as 7.41, with a median of 9.70, all within the past year.
Another notable valuation metric for FBP is its P/B ratio of 1.30. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.77. FBP's P/B has been as high as 1.33 and as low as 0.60, with a median of 1.15, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FBP has a P/S ratio of 3.18. This compares to its industry's average P/S of 4.68.
Another stellar value stock you could consider is Customers Bancorp Inc. CUBI, which is a Zacks Rank #2 (Buy) stock with a Value Score of A.
Shares of Customers Bancorp are currently trading at a forward earnings multiple of 6.06 and a price to cash flow ratio of 8.88 compared to its industry's P/E and PEG ratio of 11.05 and 12.64, respectively. Over the past year, CUBI's P/E has been as high as 9.78, as low as 4.07, with a median of 5.36; its P/CF has been as high as 7.72, as low as 2.66, with a median of 3.61 during the same time period.
Additionally, CUBI boasts a P/B ratio of 1.38 while its industry's price-to-book ratio sits at 1.17. For Customers, this valuation metric has been as high as 1.44, as low as 0.47, with a median of 1.89 over the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that First Bancorp and Customers Bancorp are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FBP and CUBI feel like a great value stocks at the moment.
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