Investors with an interest in Shoes and Retail Apparel stocks have likely encountered both Skechers (SKX) and Nike (NKE). 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 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 #1 (Strong Buy), while Nike has a Zacks Rank of #3 (Hold) 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 just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SKX currently has a forward P/E ratio of 13.44, while NKE has a forward P/E of 28.75. We also note that SKX has a PEG ratio of 0.90. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NKE currently has a PEG ratio of 2.21.
Another notable valuation metric for SKX is its P/B ratio of 2. 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, NKE has a P/B of 14.51.
These metrics, and several others, help SKX earn a Value grade of A, while NKE has been given a Value grade of D.
SKX stands above NKE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SKX is the superior value option right now.
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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
NIKE, Inc. (NKE) : Free Stock Analysis Report
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