Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either Highwoods Properties (HIW) or 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Highwoods Properties and Digital Realty Trust are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HIW is likely seeing its earnings outlook improve to a greater extent. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HIW currently has a forward P/E ratio of 10.13, while DLR has a forward P/E of 24.33. We also note that HIW has a PEG ratio of 2.13. 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. DLR currently has a PEG ratio of 3.69.
Another notable valuation metric for HIW is its P/B ratio of 1.62. 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, DLR has a P/B of 2.51.
These are just a few of the metrics contributing to HIW's Value grade of B and DLR's Value grade of D.
HIW stands above DLR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HIW is the superior value option right now.
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Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report
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