Are Investors Undervaluing Designer Brands (DBI) Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is Designer Brands (DBI). DBI is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 7.90, while its industry has an average P/E of 10.50. Over the last 12 months, DBI's Forward P/E has been as high as 34.30 and as low as 6.64, with a median of 10.87.
We should also highlight that DBI has a P/B ratio of 2.65. 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. This stock's P/B looks solid versus its industry's average P/B of 3.16. DBI's P/B has been as high as 5.57 and as low as 2.01, with a median of 3.08, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DBI has a P/S ratio of 0.34. This compares to its industry's average P/S of 0.47.
Finally, we should also recognize that DBI has a P/CF ratio of 4.96. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. DBI's P/CF compares to its industry's average P/CF of 7.14. Over the past year, DBI's P/CF has been as high as 15.35 and as low as -41.18, with a median of -3.34.
J.Jill (JILL) may be another strong Retail - Apparel and Shoes stock to add to your shortlist. JILL is a # 1 (Strong Buy) stock with a Value grade of A.
Furthermore, J.Jill holds a P/B ratio of -3.48 and its industry's price-to-book ratio is 3.16. JILL's P/B has been as high as -0.71, as low as -4.07, with a median of -3.17 over the past 12 months.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Designer Brands and J.Jill are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DBI and JILL feels like a great value stock at the moment.
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