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TPX vs. RH: Which Stock Is the Better Value Option?

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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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both Tempur Sealy and Restoration Hardware are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

TPX currently has a forward P/E ratio of 14.06, while RH has a forward P/E of 30.85. We also note that TPX has a PEG ratio of 0.66. 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. RH currently has a PEG ratio of 1.76.

Another notable valuation metric for TPX is its P/B ratio of 22.23. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, RH has a P/B of 24.95.

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

Both TPX and RH are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TPX is the superior value option right now.


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