Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of DiamondRock Hospitality (DRH) and EastGroup Properties (EGP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
DiamondRock Hospitality and EastGroup Properties are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that DRH likely has seen a stronger improvement to its earnings outlook than EGP 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 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.
DRH currently has a forward P/E ratio of 8.63, while EGP has a forward P/E of 19.99. We also note that DRH has a PEG ratio of 2.93. 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. EGP currently has a PEG ratio of 3.11.
Another notable valuation metric for DRH is its P/B ratio of 1.33. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, EGP has a P/B of 2.91.
Based on these metrics and many more, DRH holds a Value grade of B, while EGP has a Value grade of D.
DRH has seen stronger estimate revision activity and sports more attractive valuation metrics than EGP, so it seems like value investors will conclude that DRH is the superior option right now.
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DiamondRock Hospitality Company (DRH) : Free Stock Analysis Report
EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
