Investors interested in stocks from the REIT and Equity Trust - Residential sector have probably already heard of Safehold (SAFE) and Essex Property Trust (ESS). 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.
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.
Safehold has a Zacks Rank of #2 (Buy), while Essex Property Trust has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SAFE likely has seen a stronger improvement to its earnings outlook than ESS 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 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.
SAFE currently has a forward P/E ratio of 9.53, while ESS has a forward P/E of 16.51. We also note that SAFE has a PEG ratio of 1.38. 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. ESS currently has a PEG ratio of 6.77.
Another notable valuation metric for SAFE is its P/B ratio of 0.46. 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, ESS has a P/B of 2.92.
These are just a few of the metrics contributing to SAFE's Value grade of B and ESS's Value grade of D.
SAFE has seen stronger estimate revision activity and sports more attractive valuation metrics than ESS, so it seems like value investors will conclude that SAFE is the superior 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.
