Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both Sunstone Hotel Investors (SHO) and National Health Investors (NHI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Sunstone Hotel Investors is sporting a Zacks Rank of #2 (Buy), while National Health Investors has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that SHO likely has seen a stronger improvement to its earnings outlook than NHI has recently. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
SHO currently has a forward P/E ratio of 12.28, while NHI has a forward P/E of 15.47. We also note that SHO has a PEG ratio of 2.51. 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. NHI currently has a PEG ratio of 3.38.
Another notable valuation metric for SHO is its P/B ratio of 1.28. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NHI has a P/B of 2.4.
These metrics, and several others, help SHO earn a Value grade of B, while NHI has been given a Value grade of D.
SHO has seen stronger estimate revision activity and sports more attractive valuation metrics than NHI, so it seems like value investors will conclude that SHO is the superior option right now.
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Sunstone Hotel Investors, Inc. (SHO): Free Stock Analysis Report
National Health Investors, Inc. (NHI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).