Investors interested in Retail - Apparel and Shoes stocks are likely familiar with 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.
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 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.
Urban Outfitters has a Zacks Rank of #2 (Buy), while Ermenegildo Zegna N.V. has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that URBN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
URBN currently has a forward P/E ratio of 12.27, while ZGN has a forward P/E of 25.79. We also note that URBN has a PEG ratio of 1.19. 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. ZGN currently has a PEG ratio of 3.02.
Another notable valuation metric for URBN is its P/B ratio of 2.27. 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 3.81.
Based on these metrics and many more, URBN holds a Value grade of A, while ZGN has a Value grade of C.
URBN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that URBN is likely 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).