Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both Pebblebrook Hotel (PEB) and National Health Investors (NHI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 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, Pebblebrook Hotel is sporting a Zacks Rank of #1 (Strong Buy), while National Health Investors has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PEB likely has seen a stronger improvement to its earnings outlook than NHI has recently. But this is only part of the picture for value investors.
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.
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.
PEB currently has a forward P/E ratio of 9.13, while NHI has a forward P/E of 14.96. We also note that PEB has a PEG ratio of 1.30. 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. NHI currently has a PEG ratio of 4.09.
Another notable valuation metric for PEB is its P/B ratio of 0.65. 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, NHI has a P/B of 2.39.
These metrics, and several others, help PEB earn a Value grade of B, while NHI has been given a Value grade of D.
PEB sticks out from NHI in both our Zacks Rank and Style Scores models, so value investors will likely feel that PEB is the better option right now.
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National Health Investors, Inc. (NHI) : 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.
