SRC or AMH: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the REIT and Equity Trust - Residential sector have probably already heard of Spirit Realty (SRC) and American Homes 4 Rent (AMH). 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.
Both Spirit Realty and American Homes 4 Rent have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.
SRC currently has a forward P/E ratio of 10.13, while AMH has a forward P/E of 21.57. We also note that SRC has a PEG ratio of 0.63. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AMH currently has a PEG ratio of 2.85.
Another notable valuation metric for SRC is its P/B ratio of 1.18. 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, AMH has a P/B of 1.71.
These are just a few of the metrics contributing to SRC's Value grade of B and AMH's Value grade of D.
Both SRC and AMH are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SRC is the superior value option right now.
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Spirit Realty Capital, Inc. (SRC) : Free Stock Analysis Report
American Homes 4 Rent (AMH) : Free Stock Analysis Report
