Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both Ashford Hospitality Trust (AHT - Free Report) and Sunstone Hotel Investors (SHO - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Ashford Hospitality Trust and Sunstone Hotel Investors are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
AHT currently has a forward P/E ratio of 6, while SHO has a forward P/E of 14.86. We also note that AHT has a PEG ratio of 1.20. 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. SHO currently has a PEG ratio of 2.48.
Another notable valuation metric for AHT is its P/B ratio of 1.41. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHO has a P/B of 1.58.
Based on these metrics and many more, AHT holds a Value grade of A, while SHO has a Value grade of C.
Both AHT and SHO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AHT is the superior value option right now.