Investors interested in Real Estate - Operations stocks are likely familiar with PennyMac Mortgage (PMT - Free Report) and Invitation Home (INVH - 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.
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.
PennyMac Mortgage and Invitation Home are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PMT has an improving earnings outlook. But this is only part of the picture 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.
PMT currently has a forward P/E ratio of 11.84, while INVH has a forward P/E of 19.07. We also note that PMT has a PEG ratio of 2.37. 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. INVH currently has a PEG ratio of 3.33.
Another notable valuation metric for PMT is its P/B ratio of 1. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, INVH has a P/B of 1.47.
These are just a few of the metrics contributing to PMT's Value grade of B and INVH's Value grade of F.
PMT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PMT is likely the superior value option right now.