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

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Investors looking for stocks in the Retail - Home Furnishings sector might want to consider either Tempur Sealy (TPX - Free Report) or 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.

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, 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. 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 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.

TPX currently has a forward P/E ratio of 15.93, while RH has a forward P/E of 27.01. We also note that TPX has a PEG ratio of 0.88. 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. RH currently has a PEG ratio of 1.

Another notable valuation metric for TPX is its P/B ratio of 15.90. 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, RH has a P/B of 34.75.

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

TPX stands above RH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TPX is the superior value option right now.


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