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TPX vs. RH: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Retail - Home Furnishings sector might want to consider either Tempur Sealy (TPX) or Restoration Hardware (RH). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Tempur Sealy is sporting a Zacks Rank of #2 (Buy), while Restoration Hardware has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TPX has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

TPX currently has a forward P/E ratio of 13.25, while RH has a forward P/E of 31.45. We also note that TPX has a PEG ratio of 0.62. 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. RH currently has a PEG ratio of 1.79.

Another notable valuation metric for TPX is its P/B ratio of 20.94. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RH has a P/B of 25.42.

These are just a few of the metrics contributing to TPX's Value grade of B and RH's Value grade of C.

TPX 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 TPX is likely the superior value option right now.


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Tempur Sealy International, Inc. (TPX) : Free Stock Analysis Report
 
RH (RH) : Free Stock Analysis Report
 
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