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ARHS vs. ULTA: Which Stock Is the Better Value Option?

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Investors interested in Retail - Miscellaneous stocks are likely familiar with Arhaus, Inc. (ARHS - Free Report) and Ulta Beauty (ULTA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, both Arhaus, Inc. and Ulta Beauty 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 factor that value investors are interested in.

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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

ARHS currently has a forward P/E ratio of 15.64, while ULTA has a forward P/E of 21.86. We also note that ARHS has a PEG ratio of 0.97. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ULTA currently has a PEG ratio of 1.59.

Another notable valuation metric for ARHS is its P/B ratio of 11.94. 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, ULTA has a P/B of 14.06.

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

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


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