Which stock currently offers the better value?

Investors interested in stocks in the REIT and Equity Trust – Other sector have probably heard of Highwoods Properties (HIW) and Digital Realty Trust (DLR). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.

We have found that the best way to discover great value opportunities is to combine a strong Zacks Rank with an outstanding grade in the Value category of our Style Scores system. The proven Zacks Rank places an emphasis on earnings estimates and estimate revisions, while our Style Scores aim to identify stocks with specific traits.

Currently, Highwoods Properties has a Zacks Rank of #2 (Buy), while Digital Realty Trust has a Zacks Rank of #3 (Hold). Investors should take comfort in the fact that HIW’s earnings outlook has likely improved more than DLR’s has recently. However, value investors will be interested in much more than just that.

Value investors also try to analyze a wide range of traditional numbers and metrics to determine whether a company is undervalued at its current share price level.

The Value category of the Style Scores system identifies undervalued companies using a number of key metrics, including the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other fundamentals that help us determine a company’s fair value.

HIW currently has a forward P/E ratio of 10.52, while DLR has a forward P/E ratio of 24.09. We also note that HIW has a PEG ratio of 2.21. This figure is similar to the commonly used P/E ratio, with the PEG ratio also taking into account a company’s expected earnings growth rate. DLR currently has a PEG ratio of 3.55.

Another important valuation metric for HIW is its P/B ratio of 1.68. The P/B ratio is used to compare the market value of a stock to its book value, which is defined as total assets minus total liabilities. For comparison, DLR has a P/B ratio of 2.48.

These and several other indicators help HIW to achieve a grade of B, while DLR receives a grade of D.

HIW currently has an improving earnings outlook, which makes it stand out in our Zacks Rank model. And based on the valuation metrics mentioned above, we believe HIW is probably the better value option right now.

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Highwoods Properties, Inc. (HIW): Free Stock Analysis Report

Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report

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