Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either DiamondRock Hospitality (DRH) or Getty Realty (GTY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, DiamondRock Hospitality has a Zacks Rank of #2 (Buy), while Getty Realty 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 DRH is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DRH currently has a forward P/E ratio of 9.76, while GTY has a forward P/E of 12.86. We also note that DRH has a PEG ratio of 1.56. 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. GTY currently has a PEG ratio of 2.78.
Another notable valuation metric for DRH is its P/B ratio of 1.62. 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, GTY has a P/B of 1.79.
These are just a few of the metrics contributing to DRH's Value grade of A and GTY's Value grade of C.
DRH sticks out from GTY in both our Zacks Rank and Style Scores models, so value investors will likely feel that DRH is the better option right now.
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DiamondRock Hospitality Company (DRH): Free Stock Analysis Report
Getty Realty Corporation (GTY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).