WOOF vs. ULTA: Which Stock Is the Better Value Option?

Investors looking for stocks in the Retail - Miscellaneous sector might want to consider either Petco Health & Wellness (WOOF) or Ulta Beauty (ULTA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Petco Health & Wellness is sporting a Zacks Rank of #1 (Strong Buy), while Ulta Beauty has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WOOF is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

WOOF currently has a forward P/E ratio of 14.32, while ULTA has a forward P/E of 16.68. We also note that WOOF has a PEG ratio of 1.49. 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. ULTA currently has a PEG ratio of 1.50.

Another notable valuation metric for WOOF is its P/B ratio of 0.76. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ULTA has a P/B of 7.96.

Based on these metrics and many more, WOOF holds a Value grade of B, while ULTA has a Value grade of C.

WOOF sticks out from ULTA in both our Zacks Rank and Style Scores models, so value investors will likely feel that WOOF is the better option right now.

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

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