WOOF or ARHS: Which Is the Better Value Stock Right Now?

Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Petco Health & Wellness (WOOF) and Arhaus, Inc. (ARHS). 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 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.

Currently, both Petco Health & Wellness and Arhaus, Inc. are holding a Zacks Rank of #1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

WOOF currently has a forward P/E ratio of 10.21, while ARHS has a forward P/E of 21.67. We also note that WOOF has a PEG ratio of 0.93. 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. ARHS currently has a PEG ratio of 3.33.

Another notable valuation metric for WOOF is its P/B ratio of 0.66. 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, ARHS has a P/B of 4.

These are just a few of the metrics contributing to WOOF's Value grade of A and ARHS's Value grade of C.

Both WOOF and ARHS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WOOF is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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