Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Boot Barn (BOOT) and Tapestry (TPR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Boot Barn has a Zacks Rank of #2 (Buy), while Tapestry has a Zacks Rank of #3 (Hold) right now. This means that BOOT'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.
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.
BOOT currently has a forward P/E ratio of 16.71, while TPR has a forward P/E of 19.63. We also note that BOOT has a PEG ratio of 0.99. 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. TPR currently has a PEG ratio of 1.38.
Another notable valuation metric for BOOT is its P/B ratio of 3.32. 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, TPR has a P/B of 45.11.
These metrics, and several others, help BOOT earn a Value grade of B, while TPR has been given a Value grade of D.
BOOT has seen stronger estimate revision activity and sports more attractive valuation metrics than TPR, so it seems like value investors will conclude that BOOT is the superior option right now.
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Boot Barn Holdings, Inc. (BOOT): Free Stock Analysis Report
Tapestry, Inc. (TPR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).