Investors with an interest in Textile - Apparel stocks have likely encountered both Superior Group (SGC) and Cintas (CTAS). But which of these two companies is the best option for those looking for undervalued stocks? 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, Superior Group has a Zacks Rank of #2 (Buy), while Cintas 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 SGC has an improving earnings outlook. However, value investors will care about much more than just this.
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.
SGC currently has a forward P/E ratio of 19.33, while CTAS has a forward P/E of 36.55. We also note that SGC has a PEG ratio of 1.93. 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. CTAS currently has a PEG ratio of 3.24.
Another notable valuation metric for SGC is its P/B ratio of 1.02. 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, CTAS has a P/B of 15.61.
Based on these metrics and many more, SGC holds a Value grade of A, while CTAS has a Value grade of F.
SGC has seen stronger estimate revision activity and sports more attractive valuation metrics than CTAS, so it seems like value investors will conclude that SGC is the superior option right now.
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Superior Group of Companies, Inc. (SGC): Free Stock Analysis Report
Cintas Corporation (CTAS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).