Investors interested in Retail - Home Furnishings stocks are likely familiar with Ethan Allen (ETH) and Williams-Sonoma (WSM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ethan Allen has a Zacks Rank of #2 (Buy), while Williams-Sonoma has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ETH has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
ETH currently has a forward P/E ratio of 12.67, while WSM has a forward P/E of 13.21. We also note that ETH has a PEG ratio of 0.84. 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. WSM currently has a PEG ratio of 1.83.
Another notable valuation metric for ETH is its P/B ratio of 1.44. 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, WSM has a P/B of 4.31.
These are just a few of the metrics contributing to ETH's Value grade of A and WSM's Value grade of C.
ETH stands above WSM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ETH is the superior value option right now.
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Ethan Allen Interiors Inc. (ETH) : Free Stock Analysis Report
Williams-Sonoma, Inc. (WSM) : Free Stock Analysis Report
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