Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either CCA (CXW - Free Report) or Digital Realty Trust (DLR - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, CCA has a Zacks Rank of #2 (Buy), while Digital Realty Trust has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CXW has an improving earnings outlook. 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.
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.
CXW currently has a forward P/E ratio of 11.09, while DLR has a forward P/E of 18.73. We also note that CXW has a PEG ratio of 1.85. 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. DLR currently has a PEG ratio of 2.72.
Another notable valuation metric for CXW is its P/B ratio of 2.13. 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, DLR has a P/B of 2.66.
These metrics, and several others, help CXW earn a Value grade of A, while DLR has been given a Value grade of D.
CXW stands above DLR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CXW is the superior value option right now.