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TPX vs. RH: Which Stock Should Value Investors Buy Now?

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Investors interested in Retail - Home Furnishings stocks are likely familiar with Tempur Sealy (TPX) and Restoration Hardware (RH). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Tempur Sealy has a Zacks Rank of #2 (Buy), while Restoration Hardware has a Zacks Rank of #3 (Hold). This means that TPX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

TPX currently has a forward P/E ratio of 15.73, while RH has a forward P/E of 26.12. We also note that TPX has a PEG ratio of 0.67. 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 0.96.

Another notable valuation metric for TPX is its P/B ratio of 12.66. 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, RH has a P/B of 31.50.

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
 
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Zacks Investment Research