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ITUB or HDB: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Itau (ITUB) and HDFC Bank (HDB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Banco Itau has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ITUB is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

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Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ITUB currently has a forward P/E ratio of 8.79, while HDB has a forward P/E of 20.14. We also note that ITUB has a PEG ratio of 0.91. 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. HDB currently has a PEG ratio of 1.41.

Another notable valuation metric for ITUB is its P/B ratio of 1.86. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HDB has a P/B of 1.89.

These metrics, and several others, help ITUB earn a Value grade of B, while HDB has been given a Value grade of C.

ITUB stands above HDB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ITUB is the superior value option right now.

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

HDFC Bank Limited (HDB) : Free Stock Analysis Report

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Zacks Investment Research