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HBI vs. LULU: Which Stock Is the Better Value Option?

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Investors interested in Textile - Apparel stocks are likely familiar with HanesBrands (HBI) and Lululemon (LULU). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

HanesBrands and Lululemon are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that HBI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

HBI currently has a forward P/E ratio of 11.07, while LULU has a forward P/E of 57.68. We also note that HBI has a PEG ratio of 1.31. 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. LULU currently has a PEG ratio of 3.15.

Another notable valuation metric for HBI is its P/B ratio of 11.69. 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, LULU has a P/B of 20.74.

These are just a few of the metrics contributing to HBI's Value grade of B and LULU's Value grade of D.

HBI sticks out from LULU in both our Zacks Rank and Style Scores models, so value investors will likely feel that HBI is the better option right now.


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Hanesbrands Inc. (HBI) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
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