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 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.

Apollo Commerical Finance and Ladder Capital are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ARI has an improving earnings outlook. But this is just one piece of the puzzle 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 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.

ARI currently has a forward P/E ratio of 9.28, while LADR has a forward P/E of 10.57. We also note that ARI has a PEG ratio of 0.23. 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. LADR currently has a PEG ratio of 2.36.

Another notable valuation metric for ARI is its P/B ratio of 0.67. 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, LADR has a P/B of 0.85.

These metrics, and several others, help ARI earn a Value grade of B, while LADR has been given a 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research