In This Article:
Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of RLJ Lodging (RLJ) and National Health Investors (NHI). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, RLJ Lodging has a Zacks Rank of #2 (Buy), while National Health Investors has a Zacks Rank of #3 (Hold). This means that RLJ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
RLJ currently has a forward P/E ratio of 6.76, while NHI has a forward P/E of 15.72. We also note that RLJ has a PEG ratio of 2.02. 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. NHI currently has a PEG ratio of 4.64.
Another notable valuation metric for RLJ is its P/B ratio of 0.82. 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, NHI has a P/B of 2.43.
Based on these metrics and many more, RLJ holds a Value grade of A, while NHI has a Value grade of D.
RLJ is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that RLJ is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
RLJ Lodging Trust (RLJ) : Free Stock Analysis Report
National Health Investors, Inc. (NHI) : Free Stock Analysis Report