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GAP vs. DECK: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Gap (GAP - Free Report) and Deckers (DECK - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Gap and Deckers are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. Investors should feel comfortable knowing that GAP likely has seen a stronger improvement to its earnings outlook than DECK has recently. However, value investors will care about much more than just this.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

GAP currently has a forward P/E ratio of 12.47, while DECK has a forward P/E of 15.83. We also note that GAP has a PEG ratio of 2.96. 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. DECK currently has a PEG ratio of 4.57.

Another notable valuation metric for GAP is its P/B ratio of 2.72. 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, DECK has a P/B of 5.99.

Based on these metrics and many more, GAP holds a Value grade of B, while DECK has a Value grade of C.

GAP has seen stronger estimate revision activity and sports more attractive valuation metrics than DECK, so it seems like value investors will conclude that GAP is the superior option right now.


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