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ITUB vs. RY: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Banks - Foreign stocks have likely encountered both Banco Itau (ITUB) and Royal Bank (RY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Banco Itau has a Zacks Rank of #2 (Buy), while Royal Bank has a Zacks Rank of #3 (Hold). 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 piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

ITUB currently has a forward P/E ratio of 7.59, while RY has a forward P/E of 10.92. We also note that ITUB has a PEG ratio of 0.33. 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. RY currently has a PEG ratio of 2.06.

Another notable valuation metric for ITUB is its P/B ratio of 1.49. 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, RY has a P/B of 1.83.

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

ITUB 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 ITUB is likely the superior value option right now.


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Itau Unibanco Holding S.A. (ITUB) : Free Stock Analysis Report
 
Royal Bank Of Canada (RY) : Free Stock Analysis Report
 
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