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AEO vs. DECK: Which Stock Is the Better Value Option?

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Investors interested in Retail - Apparel and Shoes stocks are likely familiar with American Eagle Outfitters (AEO - Free Report) and Deckers (DECK - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

American Eagle Outfitters and Deckers are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AEO has an improving earnings outlook. However, value investors will care about much more than just this.

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 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.

AEO currently has a forward P/E ratio of 13.41, while DECK has a forward P/E of 22.72. We also note that AEO has a PEG ratio of 0.88. 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. DECK currently has a PEG ratio of 1.28.

Another notable valuation metric for AEO is its P/B ratio of 2.05. 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, DECK has a P/B of 7.38.

These are just a few of the metrics contributing to AEO's Value grade of A and DECK's Value grade of C.

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


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American Eagle Outfitters, Inc. (AEO) - free report >>

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