Investors interested in stocks from the REIT and Equity Trust - Retail sector have probably already heard of Tanger Factory Outlet (SKT) and Equinix (EQIX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Tanger Factory Outlet is sporting a Zacks Rank of #2 (Buy), while Equinix has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SKT is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SKT currently has a forward P/E ratio of 10.73, while EQIX has a forward P/E of 23.62. We also note that SKT has a PEG ratio of 1.21. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. EQIX currently has a PEG ratio of 2.51.
Another notable valuation metric for SKT is its P/B ratio of 3.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, EQIX has a P/B of 5.64.
These are just a few of the metrics contributing to SKT's Value grade of B and EQIX's Value grade of D.
SKT stands above EQIX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SKT is the superior value option right now.
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