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DRH vs. VTR: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of DiamondRock Hospitality (DRH) and Ventas (VTR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 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.

DiamondRock Hospitality and Ventas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DRH has an improving earnings outlook. However, value investors will care about much more than just this.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

DRH currently has a forward P/E ratio of 7.25, while VTR has a forward P/E of 8.88. We also note that DRH has a PEG ratio of 1.45. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. VTR currently has a PEG ratio of 2.96.

Another notable valuation metric for DRH is its P/B ratio of 0.48. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, VTR has a P/B of 0.98.

These metrics, and several others, help DRH earn a Value grade of A, while VTR has been given a Value grade of C.

DRH 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 DRH is likely the superior value option right now.

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