Investors interested in stocks from the Hotels and Motels sector have probably already heard of Hilton Grand Vacations Inc. (HGV - Free Report) and Huazhu Group (HTHT - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Hilton Grand Vacations Inc. is sporting a Zacks Rank of #2 (Buy), while Huazhu Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that HGV 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 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
HGV currently has a forward P/E ratio of 10.23, while HTHT has a forward P/E of 37.26. We also note that HGV has a PEG ratio of 1.14. 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. HTHT currently has a PEG ratio of 2.67.
Another notable valuation metric for HGV is its P/B ratio of 5.28. 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, HTHT has a P/B of 9.70.
Based on these metrics and many more, HGV holds a Value grade of B, while HTHT has a Value grade of D.
HGV has seen stronger estimate revision activity and sports more attractive valuation metrics than HTHT, so it seems like value investors will conclude that HGV is the superior option right now.