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CIO vs. HIW: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either City Office REIT (CIO) or 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.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, City Office REIT has a Zacks Rank of #2 (Buy), while Highwoods Properties has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CIO has an improving earnings 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.

CIO currently has a forward P/E ratio of 9.86, while HIW has a forward P/E of 13.18. We also note that CIO has a PEG ratio of 1.23. 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 3.28.

Another notable valuation metric for CIO is its P/B ratio of 1.70. 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, HIW has a P/B of 2.12.

These metrics, and several others, help CIO earn a Value grade of B, while HIW has been given 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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City Office REIT, Inc. (CIO) : Free Stock Analysis Report
 
Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report
 
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