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 stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.
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 factor that value investors are interested in.
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 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 2.16, while HTHT has a forward P/E of 41.81. We also note that GHG has a PEG ratio of 0.12. 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 2.75.
Another notable valuation metric for GHG is its P/B ratio of 4.59. 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, HTHT has a P/B of 11.16.
Based on these metrics and many more, GHG holds a Value grade of B, while HTHT has a Value grade of F.
GHG 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 GHG is likely the superior value option right now.