Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either DiamondRock Hospitality (DRH) or CubeSmart (CUBE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
DiamondRock Hospitality and CubeSmart are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that DRH likely has seen a stronger improvement to its earnings outlook than CUBE has recently. However, value investors will care about much more than just this.
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.
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.
DRH currently has a forward P/E ratio of 8.47, while CUBE has a forward P/E of 14.05. We also note that DRH has a PEG ratio of 4.41. 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. CUBE currently has a PEG ratio of 8.07.
Another notable valuation metric for DRH is its P/B ratio of 1.19. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CUBE has a P/B of 3.01.
These metrics, and several others, help DRH earn a Value grade of B, while CUBE has been given a Value grade of D.
DRH stands above CUBE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DRH is the superior value option right now.
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DiamondRock Hospitality Company (DRH): Free Stock Analysis Report CubeSmart (CUBE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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