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DRH vs. CUBE: Which Stock Should Value Investors Buy Now?

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Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both DiamondRock Hospitality (DRH - Free Report) and CubeSmart (CUBE - 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

DiamondRock Hospitality has a Zacks Rank of #2 (Buy), while CubeSmart has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DRH likely has seen a stronger improvement to its earnings outlook than CUBE has recently. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

DRH currently has a forward P/E ratio of 8.03, while CUBE has a forward P/E of 15.85. We also note that DRH has a PEG ratio of 4.61. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CUBE currently has a PEG ratio of 7.51.

Another notable valuation metric for DRH is its P/B ratio of 1.07. 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, CUBE has a P/B of 3.26.

Based on these metrics and many more, DRH holds a Value grade of B, while CUBE has a Value grade of D.

DRH is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that DRH is likely the superior value option right now.


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