Investors with an interest in Hotels and Motels stocks have likely encountered both H World Group (HTHT) and Choice Hotels (CHH). 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 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.
Currently, H World Group has a Zacks Rank of #2 (Buy), while Choice Hotels has a Zacks Rank of #3 (Hold). This means that HTHT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
HTHT currently has a forward P/E ratio of 15.19, while CHH has a forward P/E of 15.47. We also note that HTHT has a PEG ratio of 1.04. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CHH currently has a PEG ratio of 4.39.
Another notable valuation metric for HTHT is its P/B ratio of 7.73. 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, CHH has a P/B of 36.59.
Based on these metrics and many more, HTHT holds a Value grade of B, while CHH has a Value grade of C.
HTHT sticks out from CHH in both our Zacks Rank and Style Scores models, so value investors will likely feel that HTHT is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
