Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Hospitality Properites (HPT - Free Report) and HCP (HCP - 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Hospitality Properites has a Zacks Rank of #2 (Buy), while HCP has a Zacks Rank of #3 (Hold) right now. This means that HPT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
HPT currently has a forward P/E ratio of 6.68, while HCP has a forward P/E of 15.64. We also note that HPT has a PEG ratio of 1.34. 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. HCP currently has a PEG ratio of 7.16.
Another notable valuation metric for HPT is its P/B ratio of 1.56. 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, HCP has a P/B of 2.37.
These metrics, and several others, help HPT earn a Value grade of A, while HCP has been given a Value grade of D.
HPT sticks out from HCP in both our Zacks Rank and Style Scores models, so value investors will likely feel that HPT is the better option right now.