Investors interested in REIT and Equity Trust - Other stocks are likely familiar with Hudson Pacific Properties (HPP) and EastGroup Properties (EGP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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, Hudson Pacific Properties has a Zacks Rank of #1 (Strong Buy), while EastGroup Properties has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HPP is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
HPP currently has a forward P/E ratio of 10.37, while EGP has a forward P/E of 21.16. We also note that HPP has a PEG ratio of 0.88. 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. EGP currently has a PEG ratio of 3.04.
Another notable valuation metric for HPP is its P/B ratio of 0.22. 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, EGP has a P/B of 3.04.
Based on these metrics and many more, HPP holds a Value grade of B, while EGP has a Value grade of D.
HPP 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 HPP is likely the superior value option right now.
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Hudson Pacific Properties, Inc. (HPP): Free Stock Analysis Report
EastGroup Properties, Inc. (EGP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).