Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Santander (SAN) or National Australia Bank Ltd. (NABZY). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.

Right now, Banco Santander is sporting a Zacks Rank of #1 (Strong Buy), while National Australia Bank Ltd. has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SAN is likely seeing its earnings outlook improve to a greater extent. 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 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.

SAN currently has a forward P/E ratio of 7.42, while NABZY has a forward P/E of 14.73. We also note that SAN has a PEG ratio of 0.78. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NABZY currently has a PEG ratio of 7.83.

Another notable valuation metric for SAN is its P/B ratio of 0.92. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NABZY has a P/B of 1.61.

Based on these metrics and many more, SAN holds a Value grade of A, while NABZY has a Value grade of D.

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

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

National Australia Bank Ltd. (NABZY) : Free Stock Analysis Report

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

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