SHG vs. ITUB: Which Stock Is the Better Value Option?

Investors looking for stocks in the Banks - Foreign sector might want to consider either Shinhan Financial (SHG) or Banco Itau (ITUB). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Shinhan Financial has a Zacks Rank of #1 (Strong Buy), while Banco Itau has a Zacks Rank of #2 (Buy) right now. This means that SHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SHG currently has a forward P/E ratio of 7.60, while ITUB has a forward P/E of 9.02. We also note that SHG has a PEG ratio of 0.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ITUB currently has a PEG ratio of 0.86.

Another notable valuation metric for SHG is its P/B ratio of 0.7. 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, ITUB has a P/B of 2.26.

These are just a few of the metrics contributing to SHG's Value grade of B and ITUB's Value grade of C.

SHG 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 SHG is likely the superior value option right now.

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Shinhan Financial Group Co Ltd (SHG): Free Stock Analysis Report

Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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