HGV or CHH: Which Is the Better Value Stock Right Now?

Investors with an interest in Hotels and Motels stocks have likely encountered both Hilton Grand Vacations (HGV) and Choice Hotels (CHH). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Hilton Grand Vacations is sporting a Zacks Rank of #1 (Strong Buy), while Choice Hotels 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 HGV is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 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.

HGV currently has a forward P/E ratio of 12.14, while CHH has a forward P/E of 13.87. We also note that HGV has a PEG ratio of 0.62. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CHH currently has a PEG ratio of 4.09.

Another notable valuation metric for HGV is its P/B ratio of 2.77. 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, CHH has a P/B of 33.53.

These metrics, and several others, help HGV earn a Value grade of A, while CHH has been given a Value grade of C.

HGV stands above CHH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HGV is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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