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FRG vs. OLLI: Which Stock Is the Better Value Option?

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Zacks Equity Research
·2 min read
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Investors interested in Consumer Products - Staples stocks are likely familiar with Franchise Group (FRG) and Ollie's Bargain Outlet (OLLI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, Franchise Group has a Zacks Rank of #2 (Buy), while Ollie's Bargain Outlet 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 FRG is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

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.

FRG currently has a forward P/E ratio of 13.87, while OLLI has a forward P/E of 32.02. We also note that FRG has a PEG ratio of 0.92. 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. OLLI currently has a PEG ratio of 1.69.

Another notable valuation metric for FRG is its P/B ratio of 4.19. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, OLLI has a P/B of 4.63.

These metrics, and several others, help FRG earn a Value grade of B, while OLLI has been given a Value grade of C.

FRG 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 FRG is likely the superior value option right now.


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