Investors interested in REIT and Equity Trust - Other stocks are likely familiar with Sunstone Hotel Investors (SHO) and National Health Investors (NHI). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Sunstone Hotel Investors and National Health Investors are sporting 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. However, value investors will care about much more than just this.
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.
SHO currently has a forward P/E ratio of 10.92, while NHI has a forward P/E of 15.88. We also note that SHO has a PEG ratio of 2.73. 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 3.01.
Another notable valuation metric for SHO is its P/B ratio of 1.04. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NHI has a P/B of 2.45.
These are just a few of the metrics contributing to SHO's Value grade of B and NHI's 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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