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IRM or PSA: Which Is the Better Value Stock Right Now?

Zacks.com logo Zacks.com 10/22/2020

Investors interested in stocks from the REIT and Equity Trust - Other sector have probably already heard of Iron Mountain (IRM) and Public Storage (PSA). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Iron Mountain is sporting a Zacks Rank of #2 (Buy), while Public Storage 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 IRM 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.

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.

IRM currently has a forward P/E ratio of 12.46, while PSA has a forward P/E of 22.39. We also note that IRM has a PEG ratio of 2.13. 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. PSA currently has a PEG ratio of 6.67.

Another notable valuation metric for IRM is its P/B ratio of 7.70. 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, PSA has a P/B of 8.34.

Based on these metrics and many more, IRM holds a Value grade of B, while PSA has a Value grade of D.

IRM 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 IRM is likely the superior value option right now.

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