Investors interested in REIT and Equity Trust - Other stocks are likely familiar with Alpine Income (PINE) and Omega Healthcare Investors (OHI). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Alpine Income and Omega Healthcare Investors have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
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.
PINE currently has a forward P/E ratio of 9.38, while OHI has a forward P/E of 14.57. We also note that PINE has a PEG ratio of 1.34. 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. OHI currently has a PEG ratio of 1.47.
Another notable valuation metric for PINE is its P/B ratio of 0.98. 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, OHI has a P/B of 2.58.
These metrics, and several others, help PINE earn a Value grade of B, while OHI has been given a Value grade of D.
Both PINE and OHI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PINE is the superior value 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.
