Investors looking for stocks in the Hotels and Motels sector might want to consider either GreenTree Hospitality Group Ltd. Sponsored ADR (GHG - Free Report) or Huazhu Group (HTHT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, GreenTree Hospitality Group Ltd. Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Huazhu Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GHG likely has seen a stronger improvement to its earnings outlook than HTHT has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
GHG currently has a forward P/E ratio of 2.40, while HTHT has a forward P/E of 48.97. We also note that GHG has a PEG ratio of 0.14. 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. HTHT currently has a PEG ratio of 3.22.
Another notable valuation metric for GHG is its P/B ratio of 4.24. 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, HTHT has a P/B of 9.65.
These are just a few of the metrics contributing to GHG's Value grade of B and HTHT's Value grade of F.
GHG has seen stronger estimate revision activity and sports more attractive valuation metrics than HTHT, so it seems like value investors will conclude that GHG is the superior option right now.