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RL vs. LULU: Which Stock Is the Better Value Option?

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Investors with an interest in Textile - Apparel stocks have likely encountered both Ralph Lauren (RL - Free Report) and Lululemon (LULU - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, both Ralph Lauren and Lululemon are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

RL currently has a forward P/E ratio of 15.49, while LULU has a forward P/E of 31.89. We also note that RL has a PEG ratio of 1.07. 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. LULU currently has a PEG ratio of 1.59.

Another notable valuation metric for RL is its P/B ratio of 4.03. 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 16.35.

These metrics, and several others, help RL earn a Value grade of B, while LULU has been given a Value grade of F.

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


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Ralph Lauren Corporation (RL) - free report >>

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