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

Zacks Equity Research
·2-min read

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Sumitomo Mitsui (SMFG) and United Overseas Bank Ltd. (UOVEY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Sumitomo Mitsui and United Overseas Bank Ltd. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SMFG has an improving earnings outlook. However, value investors will care about much more than just this.

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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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.

SMFG currently has a forward P/E ratio of 7.36, while UOVEY has a forward P/E of 10.55. We also note that SMFG has a PEG ratio of 0.54. 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. UOVEY currently has a PEG ratio of 0.66.

Another notable valuation metric for SMFG is its P/B ratio of 0.44. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, UOVEY has a P/B of 1.04.

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

SMFG has seen stronger estimate revision activity and sports more attractive valuation metrics than UOVEY, so it seems like value investors will conclude that SMFG is the superior option right now.


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Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
 
United Overseas Bank Ltd. (UOVEY) : Free Stock Analysis Report
 
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Zacks Investment Research