NEW YORK ( TheStreet) -- In the midst of a bank stock rally of historical proportions, where do investors look for long-term bargains?
During the aftermath of the credit crisis -- with so many bank and thrift holding companies seeing continual pressure to earnings from loan losses and related costs -- investors and analysts have focused on price-to-book-value ratios, as an easy way of comparison.
At this point, with so many banks turning a profit, price-to-book is still useful when looking for bargains, but investors should also consider price multiples to earnings.
FIG Partners analyst John Rodis says investors should look at price multiples to 2013 earnings estimates, "because things are certainly better this year, and by 2013 you're going to have a good read on things."Rodis says that "for better or worse, the group has been pretty strong so far this year, and the group has momentum, but on a valuation basis, for the better quality names, it is hard to justify much higher levels," adding that "it also seems that there's new money coming into the group, from institutions that were sitting on the sidelines." According to the analyst, "prices tend to overshoot," both on the downside, and now on the upside. Keeping in mind that most sell-side analysts focus on 12-month outlooks in their price targets, long-term investors could be well-served by focusing on the banks trading cheapest to their consensus 2013 earnings estimates. To come up with our list, we used data supplied by HighlineFI to isolate bank and thrift stocks for which consensus 2013 earnings estimates among analysts polled by Thomson Reuters were available. We limited the group to names with average daily trading volume of at least 40,000 shares. The list we came up with may surprise you, since it features many of the best-known U.S. banking names. Here are the five actively traded bank stocks trading cheapest to consensus 2013 earnings estimates, ordered by descending forward price-to-earnings ratios: