Investors with an interest in Banks – Major Regional stocks have likely encountered both KeyCorp (KEY) and Bank of America (BAC). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
KeyCorp and Bank of America are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
KEY currently has a forward P/E ratio of 9.52, while BAC has a forward P/E of 13.87. We also note that KEY has a PEG ratio of 0.65. 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 1.98.
Another notable valuation metric for KEY is its P/B ratio of 1.46. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, BAC has a P/B of 1.62.
Based on these metrics and many more, KEY holds a Value grade of B, while BAC has a Value grade of F.
Both KEY and BAC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KEY is the superior value option right now.
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