DRH or EGP: Which Is the Better Value Stock Right Now?
Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both DiamondRock HospitalityDRH-- (DRH) and EastGroup PropertiesEGP-- (EGP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
DiamondRock Hospitality and EastGroup Properties are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DRHDRH-- has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
DRH currently has a forward P/E ratio of 8.58, while EGPEGP-- has a forward P/E of 19.70. We also note that DRH has a PEG ratio of 2.92. 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 3.06.
Another notable valuation metric for DRH is its P/B ratio of 1.32. 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 2.87.
Based on these metrics and many more, DRH holds a Value grade of B, while EGP has 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
This article originally published on Zacks Investment Research (zacks.com).
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