Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Douglas Emmett (DEI) and CubeSmart (CUBE). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Douglas Emmett is sporting 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 DEI is likely seeing its earnings outlook improve to a greater extent. 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 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.
DEI currently has a forward P/E ratio of 8.04, while CUBE has a forward P/E of 15.19. We also note that DEI has a PEG ratio of 5.09. 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 6.77.
Another notable valuation metric for DEI is its P/B ratio of 0.55. 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, CUBE has a P/B of 3.32.
These metrics, and several others, help DEI earn a Value grade of B, while CUBE has been given a Value grade of D.
DEI has seen stronger estimate revision activity and sports more attractive valuation metrics than CUBE, so it seems like value investors will conclude that DEI is the superior option right now.
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Douglas Emmett, Inc. (DEI): Free Stock Analysis Report
CubeSmart (CUBE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).