Investors looking for stocks in the Consumer Products - Staples sector might want to consider either National Vision (EYE) or L'Oreal SA (LRLCY). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Right now, National Vision is sporting a Zacks Rank of #2 (Buy), while L'Oreal SA 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 EYE has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
EYE currently has a forward P/E ratio of 23.25, while LRLCY has a forward P/E of 26.13. We also note that EYE has a PEG ratio of 1.16. 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. LRLCY currently has a PEG ratio of 2.95.
Another notable valuation metric for EYE is its P/B ratio of 2. 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, LRLCY has a P/B of 5.65.
Based on these metrics and many more, EYE holds a Value grade of B, while LRLCY has a Value grade of D.
EYE stands above LRLCY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EYE is the superior value option right now.
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National Vision Holdings, Inc. (EYE): Free Stock Analysis Report
L'Oreal SA (LRLCY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).