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GPS vs. BHOOY: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Gap (GPS) or BOOHOO GRP PLC (BHOOY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Gap and BOOHOO GRP PLC are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that GPS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

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.

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.

GPS currently has a forward P/E ratio of 8.51, while BHOOY has a forward P/E of 51.77. We also note that GPS has a PEG ratio of 0.95. 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. BHOOY currently has a PEG ratio of 1.95.

Another notable valuation metric for GPS is its P/B ratio of 1.82. 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, BHOOY has a P/B of 11.86.

These metrics, and several others, help GPS earn a Value grade of A, while BHOOY has been given a Value grade of D.

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


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