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Should Value Investors Buy Urban Outfitters (URBN) Stock?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Urban Outfitters (URBN) is a stock many investors are watching right now. URBN is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

Another valuation metric that we should highlight is URBN's P/B ratio of 2.16. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. URBN's current P/B looks attractive when compared to its industry's average P/B of 3.04. URBN's P/B has been as high as 3.09 and as low as 1.43, with a median of 2.10, over the past year.

Finally, investors will want to recognize that URBN has a P/CF ratio of 6.44. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.79. URBN's P/CF has been as high as 14.62 and as low as 4.26, with a median of 7.29, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Urban Outfitters is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, URBN feels like a great value stock at the moment.


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