Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Park Hotels & Resorts Inc. (PK) and HCP (HCP). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Park Hotels & Resorts Inc. and HCP are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that PK likely has seen a stronger improvement to its earnings outlook than HCP 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.
PK currently has a forward P/E ratio of 11, while HCP has a forward P/E of 14.57. We also note that PK has a PEG ratio of 2.61. 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. HCP currently has a PEG ratio of 4.86.
Another notable valuation metric for PK is its P/B ratio of 1.13. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, HCP has a P/B of 2.30.
Based on these metrics and many more, PK holds a Value grade of B, while HCP has a Value grade of C.
PK sticks out from HCP in both our Zacks Rank and Style Scores models, so value investors will likely feel that PK is the better option right now.
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