Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Hospitality Properites and Lexington Realty (LXP - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Hospitality Properites and Lexington Realty are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that HPT likely has seen a stronger improvement to its earnings outlook than LXP has recently. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HPT currently has a forward P/E ratio of 6.74, while LXP has a forward P/E of 12.17. We also note that HPT has a PEG ratio of 1.35. 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. LXP currently has a PEG ratio of 13.53.
Another notable valuation metric for HPT is its P/B ratio of 1.48. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LXP has a P/B of 1.78.
Based on these metrics and many more, HPT holds a Value grade of B, while LXP has a Value grade of C.
HPT has seen stronger estimate revision activity and sports more attractive valuation metrics than LXP, so it seems like value investors will conclude that HPT is the superior option right now.