Since Christmas Eve the Australia and New Zealand Banking Group (ASX: ANZ) share price has been on an impressive run and gained 11.5%.
The Commonwealth Bank of Australia (ASX: CBA) share price has also been a solid performer over the period, rising approximately 6.5%.
Is it too late to buy ANZ Bank and Commonwealth Bank shares?
Whilst I don’t think it is too late to buy the shares of either ANZ Bank or Commonwealth Bank, one of these banks strikes me as being better value than the other.
Based on valuation and yield, I think ANZ Bank’s shares are the better option for investors right now.
After all, even after its strong run since Christmas Eve, ANZ Bank’s shares are still trading at just 10x earnings, 1.25x book value, and provide a very generous trailing fully franked 6.1% dividend.
As a comparison, Commonwealth Bank’s shares are trading at 13x earnings, 1.9x book value, and offer a trailing 5.9% dividend yield.
Should you buy ANZ Bank shares?
I think they are in the buy zone now and I’m not the only one that thinks this.
A recent note out of Goldman Sachs reveals that its analysts have ANZ Bank on the broker’s conviction buy list with a price target of $29.58.
This price target implies potential upside of approximately 13.5% or almost 20% if you factor in its dividend.
Goldman is bullish on ANZ Bank due to its exposure to the business lending market, opportunities for further absolute cost reductions, potential share buybacks, and its lower bad and doubtful debt charges.
Incidentally, Goldman also likes National Australia Bank Ltd (ASX: NAB) due to its exposure to business lending, which this year the broker believes will outperform housing lending for the first time since 2011.
Another alternative for investors to consider is the VanEck Vectors Australian Banks ETF (ASX: MVB). Rather than choosing one bank to invest in, this ETF gives investors the option of owning all big four banks, the regionals, and Macquarie Group Ltd (ASX: MQG).
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.