Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Zumiez (ZUMZ - Free Report) or Boot Barn (BOOT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Zumiez and Boot Barn have a Zacks Rank of # 1 (Strong Buy) right now. 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 only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
ZUMZ currently has a forward P/E ratio of 15.62, while BOOT has a forward P/E of 24.43. We also note that ZUMZ has a PEG ratio of 1.04. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BOOT currently has a PEG ratio of 1.06.
Another notable valuation metric for ZUMZ is its P/B ratio of 1.90. 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, BOOT has a P/B of 3.46.
Based on these metrics and many more, ZUMZ holds a Value grade of A, while BOOT has a Value grade of D.
Both ZUMZ and BOOT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ZUMZ is the superior value option right now.