TCBI vs. CFR: Which Stock Should Value Investors Buy Now?

Investors with an interest in Banks - Southwest stocks have likely encountered both Texas Capital (TCBI) and Cullen/Frost Bankers (CFR). 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Texas Capital has a Zacks Rank of #1 (Strong Buy), while Cullen/Frost Bankers has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TCBI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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 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.

TCBI currently has a forward P/E ratio of 12.02, while CFR has a forward P/E of 12.78. We also note that TCBI has a PEG ratio of 0.44. 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. CFR currently has a PEG ratio of 4.79.

Another notable valuation metric for TCBI is its P/B ratio of 1.25. 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, CFR has a P/B of 1.88.

These metrics, and several others, help TCBI earn a Value grade of B, while CFR has been given a Value grade of F.

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

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Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report

Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report

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

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