Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Geo Group (GEO) and Digital Realty Trust (DLR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Geo Group has a Zacks Rank of #1 (Strong Buy), while Digital Realty Trust has a Zacks Rank of #4 (Sell) right now. This means that GEO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
GEO currently has a forward P/E ratio of 7.70, while DLR has a forward P/E of 17.87. We also note that GEO has a PEG ratio of 1.28. 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. DLR currently has a PEG ratio of 2.58.
Another notable valuation metric for GEO is its P/B ratio of 2.42. 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, DLR has a P/B of 2.60.
These metrics, and several others, help GEO earn a Value grade of A, while DLR has been given a Value grade of D.
GEO stands above DLR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GEO is the superior value option right now.
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Geo Group Inc (The) (GEO) : Free Stock Analysis Report
Digital Realty Trust, Inc. (DLR) : Free Stock Analysis Report
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