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GEO vs. DLR: Which Stock Is the Better Value Option?


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Investors interested in REIT and Equity Trust - Other stocks are likely familiar with Geo Group (GEO) and Digital Realty Trust (DLR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Geo Group has a Zacks Rank of #1 (Strong Buy), while Digital Realty Trust 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 GEO is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 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.

GEO currently has a forward P/E ratio of 8.96, while DLR has a forward P/E of 17.62. We also note that GEO has a PEG ratio of 1.49. 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. DLR currently has a PEG ratio of 2.54.

Another notable valuation metric for GEO is its P/B ratio of 2.48. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DLR has a P/B of 2.57.

These metrics, and several others, help GEO earn a Value grade of A, while DLR has been given a Value grade of D.

GEO sticks out from DLR in both our Zacks Rank and Style Scores models, so value investors will likely feel that GEO is the better option right now.


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Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: GEO , DLR



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