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AEO vs. FIGS: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of American Eagle Outfitters (AEO - Free Report) and Figs (FIGS - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 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, American Eagle Outfitters has a Zacks Rank of #2 (Buy), while Figs has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that AEO likely has seen a stronger improvement to its earnings outlook than FIGS 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.

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.

AEO currently has a forward P/E ratio of 12.13, while FIGS has a forward P/E of 159.38. We also note that AEO has a PEG ratio of 0.96. 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. FIGS currently has a PEG ratio of 6.54.

Another notable valuation metric for AEO is its P/B ratio of 1.56. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FIGS has a P/B of 3.20.

These metrics, and several others, help AEO earn a Value grade of A, while FIGS has been given a Value grade of C.

AEO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AEO is likely the superior value option right now.


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American Eagle Outfitters, Inc. (AEO) - free report >>

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