Investors looking for stocks in the REIT and Equity Trust - Residential sector might want to consider either Safehold (SAFE) or American Homes 4 Rent (AMH). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Safehold has a Zacks Rank of #2 (Buy), while American Homes 4 Rent has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SAFE is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
SAFE currently has a forward P/E ratio of 9.12, while AMH has a forward P/E of 15.46. We also note that SAFE has a PEG ratio of 2.23. 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. AMH currently has a PEG ratio of 4.28.
Another notable valuation metric for SAFE is its P/B ratio of 0.47. 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, AMH has a P/B of 1.43.
These are just a few of the metrics contributing to SAFE's Value grade of B and AMH's Value grade of C.
SAFE stands above AMH 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 American Homes 4 Rent (AMH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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