Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Hibbett Sports (HIBB) and Ulta Beauty (ULTA). But which of these two stocks presents investors with the better value opportunity right now? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Hibbett Sports is sporting a Zacks Rank of #1 (Strong Buy), while Ulta Beauty has a Zacks Rank of #3 (Hold). This means that HIBB'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 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.
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.
HIBB currently has a forward P/E ratio of 9.16, while ULTA has a forward P/E of 26.36. We also note that HIBB has a PEG ratio of 1.41. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ULTA currently has a PEG ratio of 1.43.
Another notable valuation metric for HIBB is its P/B ratio of 0.96. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ULTA has a P/B of 10.28.
These metrics, and several others, help HIBB earn a Value grade of A, while ULTA has been given a Value grade of C.
HIBB stands above ULTA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HIBB is the superior value option right now.
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Hibbett Sports, Inc. (HIBB) : Free Stock Analysis Report
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