Which stock currently offers the better value?

Investors interested in stocks from the Banks – Foreign sector have probably heard of Banco Santander (SAN) and Sumitomo Mitsui (SMFG). But which of these two stocks is more attractive to value investors? To find out, we need to take a closer look at the two.

The best way to find great value stocks is to combine a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank highlights companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Banco Santander has a Zacks Rank of #1 (Strong Buy), while Sumitomo Mitsui has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive earnings estimate revisions, so investors can be confident that SAN has an improving earnings outlook. However, value investors will be interested in much more than just this.

Value investors analyze a variety of traditional and proven metrics to find companies that they believe are undervalued at their current share price levels.

Our Value category evaluates stocks using a number of key metrics, including the tried-and-true P/E, P/S, earnings yield and cash flow per share, as well as a number of other fundamental metrics commonly used by value investors.

SAN currently has a forward P/E ratio of 5.82, while SMFG has a forward P/E ratio of 14.52. We also note that SAN has a PEG ratio of 0.41. This popular metric is similar to the widely known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. SMFG currently has a PEG ratio of 1.55.

Another important valuation metric for SAN is its P/B ratio of 0.66. P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. For comparison, SMFG has a P/B ratio of 0.81.

These and several other metrics help SAN earn a B rating, while SMFG receives a C rating.

SAN currently has an improving earnings outlook, which makes it stand out in our Zacks Rank model. And based on the valuation metrics mentioned above, we believe SAN is probably the better value option right now.

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Banco Santander, SA (SAN): Free Stock Analysis Report

Sumitomo Mitsui Financial Group Inc (SMFG): Free Stock Analysis Report

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