Investors with an interest in Leisure and Recreation Services stocks have likely encountered both Atour Lifestyle Holdings Limited Sponsored ADR (ATAT) and Royal Caribbean (RCL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Atour Lifestyle Holdings Limited Sponsored ADR and Royal Caribbean are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that ATAT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
ATAT currently has a forward P/E ratio of 15.37, while RCL has a forward P/E of 18.42. We also note that ATAT has a PEG ratio of 0.78. 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. RCL currently has a PEG ratio of 1.11.
Another notable valuation metric for ATAT is its P/B ratio of 8.28. 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, RCL has a P/B of 8.51.
These metrics, and several others, help ATAT earn a Value grade of B, while RCL has been given a Value grade of C.
ATAT sticks out from RCL in both our Zacks Rank and Style Scores models, so value investors will likely feel that ATAT is the better option right now.
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Atour Lifestyle Holdings Limited Sponsored ADR (ATAT): Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).