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.
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.
Right now, both Urban Outfitters and Ermenegildo Zegna N.V. are sporting a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
URBN currently has a forward P/E ratio of 12.37, while ZGN has a forward P/E of 28.89. We also note that URBN has a PEG ratio of 1.40. 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 3.27.
Another notable valuation metric for URBN is its P/B ratio of 2.48. 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, ZGN has a P/B of 4.65.
These metrics, and several others, help URBN earn a Value grade of A, while ZGN has been given a Value grade of D.
Both URBN and ZGN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that URBN is 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).