Investors interested in Leisure and Recreation Products stocks are likely familiar with Yeti (YETI) and Pool Corp. (POOL). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Yeti is sporting a Zacks Rank of #2 (Buy), while Pool Corp. 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 YETI has an improving earnings outlook. But this is only part of the picture for value investors.
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.
YETI currently has a forward P/E ratio of 16.62, while POOL has a forward P/E of 18.43. We also note that YETI has a PEG ratio of 1.28. 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. POOL currently has a PEG ratio of 2.59.
Another notable valuation metric for YETI is its P/B ratio of 5.48. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, POOL has a P/B of 6.57.
Based on these metrics and many more, YETI holds a Value grade of B, while POOL has a Value grade of C.
YETI has seen stronger estimate revision activity and sports more attractive valuation metrics than POOL, so it seems like value investors will conclude that YETI is the superior option right now.
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YETI Holdings, Inc. (YETI): Free Stock Analysis Report
Pool Corporation (POOL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).