MGP vs. HCP: Which Stock Is the Better Value Option?
Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both MGM Growth Properties (MGP) and HCP (HCP). 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.
Currently, MGM Growth Properties has a Zacks Rank of #2 (Buy), while HCP has a Zacks Rank of #3 (Hold). This means that MGP'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
MGP currently has a forward P/E ratio of 13.86, while HCP has a forward P/E of 21.07. We also note that MGP has a PEG ratio of 3.99. 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. HCP currently has a PEG ratio of 6.86.
Another notable valuation metric for MGP is its P/B ratio of 0.44. 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, HCP has a P/B of 2.74.
Based on these metrics and many more, MGP holds a Value grade of B, while HCP has a Value grade of D.
MGP has seen stronger estimate revision activity and sports more attractive valuation metrics than HCP, so it seems like value investors will conclude that MGP is the superior option right now.
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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.