Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Urban Outfitters (URBN) or Ermenegildo Zegna N.V. (ZGN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Urban Outfitters has a Zacks Rank of #2 (Buy), while Ermenegildo Zegna N.V. has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that URBN has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
URBN currently has a forward P/E ratio of 12.72, while ZGN has a forward P/E of 31.17. We also note that URBN has a PEG ratio of 1.44. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ZGN currently has a PEG ratio of 4.01.
Another notable valuation metric for URBN is its P/B ratio of 2.51. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ZGN has a P/B of 4.72.
Based on these metrics and many more, URBN holds a Value grade of B, while ZGN has a Value grade of D.
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).