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AAT or O: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the REIT and Equity Trust - Retail sector might want to consider either American Assets Trust (AAT - Free Report) or Realty Income Corp. (O - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Both American Assets Trust and Realty Income Corp. have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

AAT currently has a forward P/E ratio of 11.61, while O has a forward P/E of 15.39. We also note that AAT has a PEG ratio of 1.45. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. O currently has a PEG ratio of 3.89.

Another notable valuation metric for AAT is its P/B ratio of 1.32. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, O has a P/B of 1.37.

These metrics, and several others, help AAT earn a Value grade of B, while O has been given a Value grade of D.

Both AAT and O are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AAT is the superior value option right now.


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