SHO vs. EGP: Which Stock Is the Better Value Option?
Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both Sunstone Hotel Investors (SHO) and EastGroup Properties (EGP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Sunstone Hotel Investors has a Zacks Rank of #2 (Buy), while EastGroup Properties has a Zacks Rank of #3 (Hold) right now. This means that SHO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.
SHO currently has a forward P/E ratio of 11.44, while EGP has a forward P/E of 21.11. We also note that SHO has a PEG ratio of 2.64. 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. EGP currently has a PEG ratio of 2.95.
Another notable valuation metric for SHO is its P/B ratio of 1.28. 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, EGP has a P/B of 3.05.
These metrics, and several others, help SHO earn a Value grade of B, while EGP has been given a Value grade of D.
SHO has seen stronger estimate revision activity and sports more attractive valuation metrics than EGP, so it seems like value investors will conclude that SHO is the superior option right now.
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EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
