Investors interested in stocks from the Hotels and Motels sector have probably already heard of H World Group (HTHT) and Wyndham Hotels (WH). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Right now, H World Group is sporting a Zacks Rank of #2 (Buy), while Wyndham Hotels has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HTHT has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
HTHT currently has a forward P/E ratio of 16.27, while WH has a forward P/E of 16.63. We also note that HTHT has a PEG ratio of 1.11. 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. WH currently has a PEG ratio of 2.17.
Another notable valuation metric for HTHT is its P/B ratio of 8.24. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WH has a P/B of 13.52.
These metrics, and several others, help HTHT earn a Value grade of B, while WH has been given a Value grade of D.
HTHT stands above WH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HTHT is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).