Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Urban Outfitters (URBN) and Ermenegildo Zegna N.V. (ZGN). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Urban Outfitters has a Zacks Rank of #1 (Strong Buy), while Ermenegildo Zegna N.V. has a Zacks Rank of #3 (Hold) right now. This means that URBN'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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 11.14, while ZGN has a forward P/E of 29.93. We also note that URBN has a PEG ratio of 1.26. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ZGN currently has a PEG ratio of 3.85.
Another notable valuation metric for URBN is its P/B ratio of 2.24. 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, ZGN has a P/B of 4.64.
Based on these metrics and many more, URBN holds a Value grade of B, while ZGN has a Value grade of D.
URBN stands above ZGN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that URBN is the superior value option right now.
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Urban Outfitters, Inc. (URBN): Free Stock Analysis Report
Ermenegildo Zegna N.V. (ZGN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).