Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either Sunstone Hotel Investors (SHO) or 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Sunstone Hotel Investors and National Health Investors are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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 11.10, while NHI has a forward P/E of 16.44. We also note that SHO has a PEG ratio of 2.77. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NHI currently has a PEG ratio of 3.12.
Another notable valuation metric for SHO is its P/B ratio of 1.06. 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, NHI has a P/B of 2.53.
These metrics, and several others, help SHO earn a Value grade of B, while NHI has been given a Value grade of D.
Both SHO and NHI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SHO is the superior value option right now.
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Sunstone Hotel Investors, Inc. (SHO): Free Stock Analysis Report National Health Investors, Inc. (NHI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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