Investors interested in stocks from the Textile - Apparel sector have probably already heard of Ralph Lauren (RL - Free Report) and V.F. (VFC - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Ralph Lauren and V.F. have a Zacks Rank of # 2 (Buy) right now. 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 piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
RL currently has a forward P/E ratio of 20.11, while VFC has a forward P/E of 25.64. We also note that RL has a PEG ratio of 2.27. 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. VFC currently has a PEG ratio of 2.40.
Another notable valuation metric for RL is its P/B ratio of 3.11. 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, VFC has a P/B of 9.84.
These metrics, and several others, help RL earn a Value grade of B, while VFC has been given a Value grade of D.
Both RL and VFC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RL is the superior value option right now.