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KTB vs. LULU: Which Stock Is the Better Value Option?
Investors looking for stocks in the Textile - Apparel sector might want to consider either Kontoor Brands (KTB - 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.
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 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.
Currently, both Kontoor Brands and Lululemon 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 only part of the picture 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 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.
KTB currently has a forward P/E ratio of 7.78, while LULU has a forward P/E of 29.86. We also note that KTB has a PEG ratio of 0.97. 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 1.49.
Another notable valuation metric for KTB is its P/B ratio of 10.70. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LULU has a P/B of 13.15.
These metrics, and several others, help KTB earn a Value grade of A, while LULU has been given a Value grade of D.
Both KTB and LULU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KTB is the superior value option right now.