Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Urban Outfitters (URBN) or Industria de Diseno Textil SA (IDEXY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Urban Outfitters has a Zacks Rank of #1 (Strong Buy), while Industria de Diseno Textil SA has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that URBN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
URBN currently has a forward P/E ratio of 10.53, while IDEXY has a forward P/E of 20.21. We also note that URBN has a PEG ratio of 0.58. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. IDEXY currently has a PEG ratio of 2.03.
Another notable valuation metric for URBN is its P/B ratio of 1.34. 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, IDEXY has a P/B of 5.67.
These are just a few of the metrics contributing to URBN's Value grade of A and IDEXY's Value grade of C.
URBN 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 URBN is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report