Investors looking for stocks in the Shoes and Retail Apparel sector might want to consider either Skechers (SKX) or Steven Madden (SHOO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Skechers has a Zacks Rank of #2 (Buy), while Steven Madden has a Zacks Rank of #4 (Sell) right now. This means that SKX'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.
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.
SKX currently has a forward P/E ratio of 16.15, while SHOO has a forward P/E of 19.89. We also note that SKX has a PEG ratio of 1.08. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SHOO currently has a PEG ratio of 3.31.
Another notable valuation metric for SKX is its P/B ratio of 2.46. 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, SHOO has a P/B of 3.72.
These metrics, and several others, help SKX earn a Value grade of A, while SHOO has been given a Value grade of D.
SKX 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 SKX is likely the superior value option right now.
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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Steven Madden, Ltd. (SHOO) : Free Stock Analysis Report
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