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"My momma told me, 'You better shop around.'" -- Smokey Robinson

Independent research allows investors to go beyond the stocks featured in the news and shop lesser-known alternatives. As simple as it sounds, you are better off shopping around than using the media as a filter that selects for familiar or popular stocks.

PNC Financial Services Group (NYSE:PNC) is a large cap bank stock which is frequency researched on the internet. The allure of PNC is its perceived value: like many financial companies, it trades at cheap price-to-book, price-to-earnings, and price-to-free cash flow multiples. There is much attention paid to financials as a potential contrarian, value investment thesis.

But retail investors should not take a side in this debate by buying financial stocks like PNC. As a financial institution, the book value of its assets is questionable because of slowed foreclosure proceedings and its mark-to-model Level 3 assets. Even its earnings are subject to interpretation based on how prudent its loan loss provisions are relative to the riskiness of its loan portfolio. Unfortunately, the financial statement analysis of a financial company requires more judgment and faith in the accounting standards of the firm than would be required for a firm in another sector.

Fortunately, there are non-financial stocks which appear to be better values than PNC:

Ticker

Industry

P/E (TTM)

P/B

P/Free Cash Flow

(NASDAQ:AFAM)

Home Health Care

7.06

0.79

6.51

(NASDAQ:CECO)

Education & Training Services

4.66

0.76

5.38

(NYSEMKT:MSN)

Electronic Equipment

4.32

0.83

2.07

(NYSE:OME)

Processed & Packaged Goods

3.51

0.72

2.91

(NYSE:TSO)

Oil & Gas Refining & Marketing

5.0

0.86

3.9

PNC

Money Center Banks

9.82

0.95

7.38

AFAM, CECO, MSN, OME, and TSO appear cheaper than PNC by the P/E, P/B, and P/FCF multiples. Moreover, these five companies all score well in terms of quality. They each have 10 fiscal years of positive returns to equity and have are all categorized as "safe" according to the Altman Z-score*, indicating that they are not considered bankruptcy risks:

Ticker

Company

10-Year Average ROE

Altman Z-score

AFAM

Almost Family Inc.

21.3%

4.9

CECO

Career Education Corp.

14.0%

3.2

MSN

Emerson Radio Corp.

19.1%

4.6

OME

Omega Protein Corp.

4.5%

3.1

TSO

Tesoro Corporation

11.6%

4.2

Based on lower price multiples these stocks are cheaper than PNC at current market prices. Better yet, AFAM, CECO, MSN, OME, and TSO are all quality stocks. Rather than restrict yourself to controversial financial stocks, consider a diversified mix of these five securities as a more attractive alternative.

*The Altman Z-Score is a measure of bankruptcy risk that is not based on stock price volatility. This score places companies into three groups: "safe" (Z-score > 2.99), "grey" (Z-score between 2.99 and 1.81), and "distressed" (Z-score < 1.81), and is surprisingly useful for identifying bankruptcy risk in the coming year. This method of segmenting companies uses of fundamental (financial statement) data and market capitalization only, not on price volatility. Beyond credit risk prediction, companies with higher Z-scores have historically outperformed companies with lower Z-scores, in aggregate. One sector has not been accurately modeled: Altman's Z-score has not accurately predicted the bankruptcy risk of financial companies.

"Distressed" was a label coined by researchers, and should not be taken to mean that any company is bankrupt or in default on the basis of this calculation alone. Credit scoring is not fate, only prediction based on relative past performance of companies grouped by key variables. Time will tell.

Disclaimer: This research is not a guarantee. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing. This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner.

Source: 9 Stocks That Eclipse PNC Financial