Investors interested in Financial - Investment Bank stocks are likely familiar with Raymond James Financial, Inc. (RJF) and LPL Financial Holdings Inc. (LPLA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Raymond James Financial, Inc. and LPL Financial Holdings Inc. have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
RJF currently has a forward P/E ratio of 15.57, while LPLA has a forward P/E of 18.48. We also note that RJF has a PEG ratio of 1.05. 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. LPLA currently has a PEG ratio of 1.10.
Another notable valuation metric for RJF is its P/B ratio of 3.05. 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, LPLA has a P/B of 9.68.
Based on these metrics and many more, RJF holds a Value grade of B, while LPLA has a Value grade of C.
Both RJF and LPLA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RJF is the superior value option right now.
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