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CIO or HIW: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Weyerhaeuser (WY) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors with an interest in REIT and Equity Trust - Other stocks have likely encountered both City Office REIT (CIO) and Highwoods Properties (HIW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

City Office REIT and Highwoods Properties are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CIO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

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.

CIO currently has a forward P/E ratio of 9.57, while HIW has a forward P/E of 12.97. We also note that CIO has a PEG ratio of 1.06. 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. HIW currently has a PEG ratio of 2.79.

Another notable valuation metric for CIO is its P/B ratio of 1.53. 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, HIW has a P/B of 2.13.

Based on these metrics and many more, CIO holds a Value grade of B, while HIW has a Value grade of D.

CIO has seen stronger estimate revision activity and sports more attractive valuation metrics than HIW, so it seems like value investors will conclude that CIO is the superior option right now.


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