Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Host Hotels (HST) and CubeSmart (CUBE). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Currently, Host Hotels has a Zacks Rank of #2 (Buy), while CubeSmart 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 HST is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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 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.
HST currently has a forward P/E ratio of 10.83, while CUBE has a forward P/E of 15.74. We also note that HST has a PEG ratio of 2.61. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CUBE currently has a PEG ratio of 7.01.
Another notable valuation metric for HST is its P/B ratio of 2.32. 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, CUBE has a P/B of 3.45.
These metrics, and several others, help HST earn a Value grade of B, while CUBE has been given a Value grade of D.
HST has seen stronger estimate revision activity and sports more attractive valuation metrics than CUBE, so it seems like value investors will conclude that HST is the superior option right now.
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Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report
CubeSmart (CUBE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).