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DECK vs. NKE: Which Stock Is the Better Value Option?

Zacks Equity Research
Bristol-Myers (BMY) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors with an interest in Shoes and Retail Apparel stocks have likely encountered both Deckers (DECK) and Nike (NKE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Deckers and Nike are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DECK has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

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.

DECK currently has a forward P/E ratio of 17.77, while NKE has a forward P/E of 31.33. We also note that DECK has a PEG ratio of 1.49. 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. NKE currently has a PEG ratio of 2.54.

Another notable valuation metric for DECK is its P/B ratio of 4.04. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NKE has a P/B of 14.88.

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

DECK has seen stronger estimate revision activity and sports more attractive valuation metrics than NKE, so it seems like value investors will conclude that DECK is the superior option right now.


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