Investors looking for stocks in the REIT and Equity Trust sector might want to consider either Apollo Commerical Finance (ARI) or Ladder Capital (LADR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, both Apollo Commerical Finance and Ladder Capital are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ARI currently has a forward P/E ratio of 9.44, while LADR has a forward P/E of 11.48. We also note that ARI has a PEG ratio of 0.25. 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. LADR currently has a PEG ratio of 2.31.
Another notable valuation metric for ARI is its P/B ratio of 0.74. 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, LADR has a P/B of 0.94.
These metrics, and several others, help ARI earn a Value grade of B, while LADR has been given a Value grade of D.
Both ARI and LADR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ARI is the superior value option right now.
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Apollo Commercial Real Estate Finance (ARI): Free Stock Analysis Report Ladder Capital Corp (LADR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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