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SMFG vs. HDB: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

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

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Both Sumitomo Mitsui and HDFC Bank have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture 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.

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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.

SMFG currently has a forward P/E ratio of 7.58, while HDB has a forward P/E of 22.75. We also note that SMFG has a PEG ratio of 0.41. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. HDB currently has a PEG ratio of 1.05.

Another notable valuation metric for SMFG is its P/B ratio of 0.44. The 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. By comparison, HDB has a P/B of 3.60.

These are just a few of the metrics contributing to SMFG's Value grade of B and HDB's Value grade of D.

Both SMFG and HDB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SMFG is the superior value option right now.


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Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
 
HDFC Bank Limited (HDB) : Free Stock Analysis Report
 
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