Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Santander (SAN) and Banco Itau (ITUB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Right now, Banco Santander is sporting a Zacks Rank of #2 (Buy), while Banco Itau has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SAN has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

SAN currently has a forward P/E ratio of 7.74, while ITUB has a forward P/E of 9.09. We also note that SAN has a PEG ratio of 0.90. 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. ITUB currently has a PEG ratio of 1.11.

Another notable valuation metric for SAN is its P/B ratio of 0.93. 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, ITUB has a P/B of 1.62.

Based on these metrics and many more, SAN holds a Value grade of B, while ITUB has a Value grade of F.

SAN 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 SAN is likely the superior value option right now.

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Banco Santander, S.A. (SAN):Free Stock Analysis Report

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

This article originally published on Zacks Investment Research (zacks.com).

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