OLLI vs. CL: Which Stock Is the Better Value Option?

Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Ollie's Bargain Outlet (OLLI) and Colgate-Palmolive (CL). But which of these two companies is the best option for those looking for undervalued stocks? 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, Ollie's Bargain Outlet is sporting a Zacks Rank of #2 (Buy), while Colgate-Palmolive has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that OLLI likely has seen a stronger improvement to its earnings outlook than CL has recently. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

OLLI currently has a forward P/E ratio of 16.78, while CL has a forward P/E of 22.83. We also note that OLLI has a PEG ratio of 1.32. 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. CL currently has a PEG ratio of 4.53.

Another notable valuation metric for OLLI is its P/B ratio of 2.44. 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, CL has a P/B of 144.35.

These are just a few of the metrics contributing to OLLI's Value grade of B and CL's Value grade of D.

OLLI has seen stronger estimate revision activity and sports more attractive valuation metrics than CL, so it seems like value investors will conclude that OLLI is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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