PEB or NHI: Which Is the Better Value Stock Right Now?

Investors interested in REIT and Equity Trust - Other stocks are likely familiar with Pebblebrook Hotel (PEB) and National Health Investors (NHI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Pebblebrook Hotel and National Health Investors are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that PEB likely has seen a stronger improvement to its earnings outlook than NHI 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.

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.

PEB currently has a forward P/E ratio of 10.63, while NHI has a forward P/E of 14.64. We also note that PEB has a PEG ratio of 1.24. 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. NHI currently has a PEG ratio of 3.20.

Another notable valuation metric for PEB is its P/B ratio of 0.82. 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, NHI has a P/B of 2.19.

These are just a few of the metrics contributing to PEB's Value grade of A and NHI's Value grade of D.

PEB stands above NHI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PEB is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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