Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both Hersha Hospitality (HT - Free Report) and Ventas (VTR - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Hersha Hospitality and Ventas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that HT likely has seen a stronger improvement to its earnings outlook than VTR has recently. But this is only part of the picture for value investors.
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.
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 7.61, while VTR has a forward P/E of 15.85. We also note that HT has a PEG ratio of 1.60. 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. VTR currently has a PEG ratio of 4.76.
Another notable valuation metric for HT is its P/B ratio of 0.71. 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, VTR has a P/B of 2.09.
These metrics, and several others, help HT earn a Value grade of A, while VTR has been given a Value grade of D.
HT stands above VTR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HT is the superior value option right now.