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CIO vs. LXP: Which Stock Is the Better Value Option?

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

Right now, City Office REIT is sporting a Zacks Rank of #2 (Buy), while Lexington Realty has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CIO likely has seen a stronger improvement to its earnings outlook than LXP has recently. But this is only part of the picture for value investors.

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.

CIO currently has a forward P/E ratio of 9.15, while LXP has a forward P/E of 11.47. We also note that CIO has a PEG ratio of 1.02. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. LXP currently has a PEG ratio of 4.71.

Another notable valuation metric for CIO is its P/B ratio of 1.47. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LXP has a P/B of 1.66.

These are just a few of the metrics contributing to CIO's Value grade of B and LXP's Value grade of C.

CIO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CIO is likely the superior value option right now.


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