ARI or LADR: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the REIT and Equity Trust sector might want to consider either Apollo Commerical Finance (ARI) or Ladder Capital (LADR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 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.

Apollo Commerical Finance has a Zacks Rank of #2 (Buy), while Ladder Capital has a Zacks Rank of #4 (Sell) right now. This means that ARI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.

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 10.31, while LADR has a forward P/E of 15.84. We also note that ARI has a PEG ratio of 0.27. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. LADR currently has a PEG ratio of 3.18.

Another notable valuation metric for ARI is its P/B ratio of 0.73. 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 0.9.

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

ARI has seen stronger estimate revision activity and sports more attractive valuation metrics than LADR, so it seems like value investors will conclude that ARI is the superior option right now.

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

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