Back to top

Image: Bigstock

DRH vs. CUBE: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either DiamondRock Hospitality (DRH - Free Report) or CubeSmart (CUBE - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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.

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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

DRH currently has a forward P/E ratio of 8.81, while CUBE has a forward P/E of 13.72. We also note that DRH has a PEG ratio of 4.59. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CUBE currently has a PEG ratio of 8.47.

Another notable valuation metric for DRH is its P/B ratio of 1.2. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CUBE has a P/B of 2.89.

These are just a few of the metrics contributing to DRH's Value grade of B and CUBE's Value grade of D.

DRH has seen stronger estimate revision activity and sports more attractive valuation metrics than CUBE, so it seems like value investors will conclude that DRH is the superior option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


CubeSmart (CUBE) - free report >>

DiamondRock Hospitality Company (DRH) - free report >>

Published in