Investors interested in REIT and Equity Trust - Other stocks are likely familiar with DiamondRock Hospitality (DRH) and Sunstone Hotel Investors (SHO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, DiamondRock Hospitality is sporting a Zacks Rank of #2 (Buy), while Sunstone Hotel Investors 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 DRH is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

DRH currently has a forward P/E ratio of 7.88, while SHO has a forward P/E of 10.95. We also note that DRH has a PEG ratio of 1.95. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SHO currently has a PEG ratio of 2.15.

Another notable valuation metric for DRH is its P/B ratio of 1.07. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHO has a P/B of 1.15.

These metrics, and several others, help DRH earn a Value grade of A, while SHO has been given a Value grade of C.

DRH 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 DRH is likely the superior value option right now.

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DiamondRock Hospitality Company (DRH):Free Stock Analysis Report

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Sunstone Hotel Investors, Inc. (SHO):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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