Investors with an interest in Retail - Apparel and Shoes stocks have likely encountered both Urban Outfitters (URBN) and 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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 and Ermenegildo Zegna N.V. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that URBN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
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.
URBN currently has a forward P/E ratio of 12.17, while ZGN has a forward P/E of 28.18. We also note that URBN has a PEG ratio of 1.18. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ZGN currently has a PEG ratio of 3.34.
Another notable valuation metric for URBN is its P/B ratio of 2.26. 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 4.14.
Based on these metrics and many more, URBN holds a Value grade of A, while ZGN has a Value grade of D.
URBN has seen stronger estimate revision activity and sports more attractive valuation metrics than ZGN, so it seems like value investors will conclude that URBN is the superior 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).