Investors with an interest in Hotels and Motels stocks have likely encountered both Extended Stay America (STAY) and ORIENTAL LAND (OLCLY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Extended Stay America has a Zacks Rank of #2 (Buy), while ORIENTAL LAND has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STAY has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
STAY currently has a forward P/E ratio of 18.71, while OLCLY has a forward P/E of 39.31. We also note that STAY has a PEG ratio of 2.49. 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. OLCLY currently has a PEG ratio of 3.28.
Another notable valuation metric for STAY is its P/B ratio of 3.14. 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, OLCLY has a P/B of 6.09.
These are just a few of the metrics contributing to STAY's Value grade of B and OLCLY's Value grade of F.
STAY 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 STAY is likely the superior value option right now.
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