Investors interested in Hotels and Motels stocks are likely familiar with H World Group (HTHT) and Wyndham Hotels (WH). But which of these two companies is the best option for those looking for undervalued stocks? 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.
H World Group and Wyndham Hotels are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HTHT is likely seeing its earnings outlook improve to a greater extent. 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.
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.
HTHT currently has a forward P/E ratio of 15.20, while WH has a forward P/E of 15.39. We also note that HTHT has a PEG ratio of 1.40. 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. WH currently has a PEG ratio of 1.92.
Another notable valuation metric for HTHT is its P/B ratio of 7.74. 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, WH has a P/B of 11.49.
These metrics, and several others, help HTHT earn a Value grade of B, while WH has been given a Value grade of C.
HTHT sticks out from WH in both our Zacks Rank and Style Scores models, so value investors will likely feel that HTHT is the better option right now.
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