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MGP or QTS: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either MGM Growth Properties (MGP) or QTS Realty (QTS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, MGM Growth Properties is sporting a Zacks Rank of #2 (Buy), while QTS Realty has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MGP is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

MGP currently has a forward P/E ratio of 13.18, while QTS has a forward P/E of 15.18. We also note that MGP has a PEG ratio of 1.54. 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. QTS currently has a PEG ratio of 1.60.

Another notable valuation metric for MGP is its P/B ratio of 0.36. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, QTS has a P/B of 2.24.

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

MGP sticks out from QTS in both our Zacks Rank and Style Scores models, so value investors will likely feel that MGP is the better option right now.


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