PECO vs. FRT: Which Stock Is the Better Value Option?

Investors looking for stocks in the REIT and Equity Trust - Retail sector might want to consider either Phillips Edison & Company, Inc. (PECO) or Federal Realty Investment Trust (FRT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Phillips Edison & Company, Inc. has a Zacks Rank of #2 (Buy), while Federal Realty Investment Trust has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PECO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

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.

PECO currently has a forward P/E ratio of 15.07, while FRT has a forward P/E of 16.42. We also note that PECO has a PEG ratio of 2.22. 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. FRT currently has a PEG ratio of 2.94.

Another notable valuation metric for PECO is its P/B ratio of 2.03. 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, FRT has a P/B of 3.31.

These metrics, and several others, help PECO earn a Value grade of B, while FRT has been given a Value grade of C.

PECO has seen stronger estimate revision activity and sports more attractive valuation metrics than FRT, so it seems like value investors will conclude that PECO is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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