Investors with an interest in REIT and Equity Trust - Residential stocks have likely encountered both Select Income (SIR) and UMH Properties (UMH). 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.
Currently, Select Income has a Zacks Rank of #1 (Strong Buy), while UMH Properties has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SIR is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
SIR currently has a forward P/E ratio of 3.70, while UMH has a forward P/E of 15.97. We also note that SIR has a PEG ratio of 1.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. UMH currently has a PEG ratio of 1.60.
Another notable valuation metric for SIR is its P/B ratio of 0.28. 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, UMH has a P/B of 2.64.
These metrics, and several others, help SIR earn a Value grade of A, while UMH has been given a Value grade of D.
SIR has seen stronger estimate revision activity and sports more attractive valuation metrics than UMH, so it seems like value investors will conclude that SIR is the superior option right now.
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Select Income REIT (SIR) : Free Stock Analysis Report
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