Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Ollie's Bargain Outlet (OLLI) and Colgate-Palmolive (CL). 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.
Ollie's Bargain Outlet and Colgate-Palmolive are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that OLLI has an improving earnings outlook. But this is only part of the picture for value investors.
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.
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.
OLLI currently has a forward P/E ratio of 16.10, while CL has a forward P/E of 23.98. We also note that OLLI has a PEG ratio of 1.27. 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. CL currently has a PEG ratio of 4.82.
Another notable valuation metric for OLLI is its P/B ratio of 2.33. 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, CL has a P/B of 150.54.
These metrics, and several others, help OLLI earn a Value grade of B, while CL has been given a Value grade of D.
OLLI stands above CL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that OLLI is the superior value option right now.
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Ollie's Bargain Outlet Holdings, Inc. (OLLI): Free Stock Analysis Report
Colgate-Palmolive Company (CL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).