ARI vs. LADR: Which Stock Is the Better Value Option?

Investors interested in stocks from the REIT and Equity Trust sector have probably already heard of Apollo Commerical Finance (ARI) and Ladder Capital (LADR). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Apollo Commerical Finance and Ladder Capital are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that ARI likely has seen a stronger improvement to its earnings outlook than LADR has recently. 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.

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.

ARI currently has a forward P/E ratio of 9.45, while LADR has a forward P/E of 12.16. We also note that ARI has a PEG ratio of 0.26. 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. LADR currently has a PEG ratio of 7.46.

Another notable valuation metric for ARI is its P/B ratio of 0.74. 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, LADR has a P/B of 0.96.

These are just a few of the metrics contributing to ARI's Value grade of B and LADR's Value grade of C.

ARI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ARI is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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