Investors looking for stocks in the REIT and Equity Trust - Residential sector might want to consider either NexPoint Residential Trust Inc. (NXRT) or Essex Property Trust (ESS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, NexPoint Residential Trust Inc. is sporting a Zacks Rank of #2 (Buy), while Essex Property Trust has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NXRT has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
NXRT currently has a forward P/E ratio of 10.54, while ESS has a forward P/E of 17.98. We also note that NXRT has a PEG ratio of 1.76. 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. ESS currently has a PEG ratio of 5.97.
Another notable valuation metric for NXRT is its P/B ratio of 2.29. 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, ESS has a P/B of 3.21.
Based on these metrics and many more, NXRT holds a Value grade of B, while ESS has a Value grade of D.
NXRT stands above ESS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NXRT is the superior value option right now.
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Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
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.
