Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both DiamondRock Hospitality (DRH) 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 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.
Currently, DiamondRock Hospitality has a Zacks Rank of #2 (Buy), while EastGroup Properties has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DRH likely has seen a stronger improvement to its earnings outlook than EGP has recently. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DRH currently has a forward P/E ratio of 8.42, while EGP has a forward P/E of 19.74. We also note that DRH has a PEG ratio of 2.86. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. EGP currently has a PEG ratio of 3.07.
Another notable valuation metric for DRH is its P/B ratio of 1.32. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, EGP has a P/B of 2.87.
These metrics, and several others, help DRH earn a Value grade of B, while EGP has been given a Value grade of D.
DRH has seen stronger estimate revision activity and sports more attractive valuation metrics than EGP, so it seems like value investors will conclude that DRH is the superior option right now.
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DiamondRock Hospitality Company (DRH): Free Stock Analysis Report
EastGroup Properties, Inc. (EGP): Free Stock Analysis Report