Investors looking for stocks in the REIT and Equity Trust - Residential sector might want to consider either Safehold (SAFE) or Essex Property Trust (ESS). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Safehold is sporting a Zacks Rank of #1 (Strong Buy), while Essex Property Trust has a Zacks Rank of #4 (Sell). This means that SAFE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
SAFE currently has a forward P/E ratio of 8.51, while ESS has a forward P/E of 16.14. We also note that SAFE has a PEG ratio of 2.09. 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. ESS currently has a PEG ratio of 8.11.
Another notable valuation metric for SAFE is its P/B ratio of 0.45. 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, ESS has a P/B of 2.95.
These are just a few of the metrics contributing to SAFE's Value grade of B and ESS's Value grade of D.
SAFE stands above ESS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SAFE is the superior value option right now.
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Safehold Inc. (SAFE): Free Stock Analysis Report Essex Property Trust, Inc. (ESS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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