Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Hersha Hospitality (HT - Free Report) and Ventas (VTR - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Currently, Hersha Hospitality has a Zacks Rank of #1 (Strong Buy), while Ventas has a Zacks Rank of #3 (Hold). This means that HT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
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.
HT currently has a forward P/E ratio of 9.06, while VTR has a forward P/E of 13.59. We also note that HT has a PEG ratio of 1.81. 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. VTR currently has a PEG ratio of 3.75.
Another notable valuation metric for HT is its P/B ratio of 0.81. 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, VTR has a P/B of 1.84.
Based on these metrics and many more, HT holds a Value grade of A, while VTR has a Value grade of C.
HT has seen stronger estimate revision activity and sports more attractive valuation metrics than VTR, so it seems like value investors will conclude that HT is the superior option right now.