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RL vs. LULU: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Textile - Apparel sector might want to consider either Ralph Lauren (RL - Free Report) or Lululemon (LULU - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

Ralph Lauren has a Zacks Rank of #2 (Buy), while Lululemon has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that RL 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 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.

RL currently has a forward P/E ratio of 18.47, while LULU has a forward P/E of 49.31. We also note that RL has a PEG ratio of 2.26. 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. LULU currently has a PEG ratio of 2.69.

Another notable valuation metric for RL is its P/B ratio of 3.42. 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, LULU has a P/B of 16.26.

These metrics, and several others, help RL earn a Value grade of B, while LULU has been given a Value grade of C.

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


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Ralph Lauren Corporation (RL) - free report >>

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