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GEO vs. EGP: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Geo Group (GEO) and EastGroup Properties (EGP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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.

Right now, Geo Group is sporting a Zacks Rank of #1 (Strong Buy), while EastGroup Properties has a Zacks Rank of #3 (Hold). This means that GEO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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

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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.

GEO currently has a forward P/E ratio of 3.04, while EGP has a forward P/E of 28.92. We also note that GEO has a PEG ratio of 0.30. 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. EGP currently has a PEG ratio of 4.48.

Another notable valuation metric for GEO is its P/B ratio of 0.90. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, EGP has a P/B of 5.12.

These metrics, and several others, help GEO earn a Value grade of A, while EGP has been given a Value grade of D.

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


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Geo Group Inc The (GEO) : Free Stock Analysis Report
 
EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research