Investors with an interest in Leisure and Recreation Products stocks have likely encountered both Callaway Golf (ELY) and Yeti (YETI). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Callaway Golf and Yeti are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that ELY'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.
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.
ELY currently has a forward P/E ratio of 19.32, while YETI has a forward P/E of 29.17. We also note that ELY has a PEG ratio of 0.77. 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. YETI currently has a PEG ratio of 1.73.
Another notable valuation metric for ELY is its P/B ratio of 2.57. 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, YETI has a P/B of 42.11.
These are just a few of the metrics contributing to ELY's Value grade of B and YETI's Value grade of C.
ELY 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 ELY is likely the superior value option right now.
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