Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of City Office REIT (CIO - 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.
Both City Office REIT and Ventas have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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.
CIO currently has a forward P/E ratio of 10.52, while VTR has a forward P/E of 18.62. We also note that CIO has a PEG ratio of 1.31. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. VTR currently has a PEG ratio of 5.87.
Another notable valuation metric for CIO is its P/B ratio of 1.94. 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 2.45.
These are just a few of the metrics contributing to CIO's Value grade of B and VTR's Value grade of D.
Both CIO and VTR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CIO is the superior value option right now.