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 offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Urban Outfitters and Ermenegildo Zegna N.V. are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, 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 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
URBN currently has a forward P/E ratio of 13.66, while ZGN has a forward P/E of 29.74. We also note that URBN has a PEG ratio of 1.32. 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 3.34.
Another notable valuation metric for URBN is its P/B ratio of 2.54. 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, ZGN has a P/B of 4.19.
These are just a few of the metrics contributing to URBN's Value grade of A and ZGN's Value grade of C.
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).