Investors interested in stocks from the REIT and Equity Trust - Residential sector have probably already heard of Safehold (SAFE) and Independence Realty Trust (IRT). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Safehold has a Zacks Rank of #2 (Buy), while Independence Realty Trust has a Zacks Rank of #4 (Sell) right now. This means that SAFE'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
SAFE currently has a forward P/E ratio of 8.66, while IRT has a forward P/E of 14.20. We also note that SAFE has a PEG ratio of 1.57. 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. IRT currently has a PEG ratio of 1.80.
Another notable valuation metric for SAFE is its P/B ratio of 0.46. 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, IRT has a P/B of 1.08.
Based on these metrics and many more, SAFE holds a Value grade of B, while IRT has a Value grade of D.
SAFE stands above IRT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SAFE is the superior value option right now.
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Safehold Inc. (SAFE): Free Stock Analysis Report
Independence Realty Trust, Inc. (IRT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).