Investors interested in stocks from the Textile - Apparel sector have probably already heard of Columbia Sportswear (COLM) and Under Armour (UAA). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Currently, both Columbia Sportswear and Under Armour are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
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 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.
COLM currently has a forward P/E ratio of 23.15, while UAA has a forward P/E of 63.26. We also note that COLM has a PEG ratio of 2.13. 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. UAA currently has a PEG ratio of 2.78.
Another notable valuation metric for COLM is its P/B ratio of 4.19. 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, UAA has a P/B of 4.75.
Based on these metrics and many more, COLM holds a Value grade of B, while UAA has a Value grade of C.
Both COLM and UAA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that COLM 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
Columbia Sportswear Company (COLM) : Free Stock Analysis Report
Under Armour, Inc. (UAA) : Free Stock Analysis Report
To read this article on Zacks.com click here.