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

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Investors interested in REIT and Equity Trust - Retail stocks are likely familiar with American Assets Trust (AAT - Free Report) and Realty Income Corp. (O - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

American Assets Trust and Realty Income Corp. are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AAT has an improving earnings outlook. However, value investors will care about much more than just this.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

AAT currently has a forward P/E ratio of 12.07, while O has a forward P/E of 16.20. We also note that AAT has a PEG ratio of 1.55. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. O currently has a PEG ratio of 5.09.

Another notable valuation metric for AAT is its P/B ratio of 1.41. 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, O has a P/B of 1.47.

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

AAT stands above O thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AAT is the superior value option right now.


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