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TPX or RH: Which Is the Better Value Stock Right Now?

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Investors with an interest in Retail - Home Furnishings stocks have likely encountered both Tempur Sealy (TPX - Free Report) and Restoration Hardware (RH - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Tempur Sealy has a Zacks Rank of #1 (Strong Buy), while Restoration Hardware has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TPX is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

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 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.

TPX currently has a forward P/E ratio of 14, while RH has a forward P/E of 23.24. We also note that TPX has a PEG ratio of 0.78. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RH currently has a PEG ratio of 0.86.

Another notable valuation metric for TPX is its P/B ratio of 13.97. 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, RH has a P/B of 29.38.

Based on these metrics and many more, TPX holds a Value grade of B, while RH has a Value grade of C.

TPX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TPX is likely the superior value option right now.


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