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AEO vs. BURBY: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either American Eagle Outfitters (AEO - Free Report) or Burberry Group PLC (BURBY - 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.
American Eagle Outfitters and Burberry Group PLC are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that AEO likely has seen a stronger improvement to its earnings outlook than BURBY has recently. 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.
AEO currently has a forward P/E ratio of 17.92, while BURBY has a forward P/E of 20.32. We also note that AEO has a PEG ratio of 1.55. 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. BURBY currently has a PEG ratio of 1.71.
Another notable valuation metric for AEO is its P/B ratio of 2.03. 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, BURBY has a P/B of 5.26.
These are just a few of the metrics contributing to AEO's Value grade of B and BURBY's Value grade of C.
AEO stands above BURBY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AEO is the superior value option right now.