Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either XCel Brands (XELB - Free Report) or Tapestry (TPR - 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 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.
Right now, XCel Brands is sporting a Zacks Rank of #2 (Buy), while Tapestry has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that XELB has an improving earnings outlook. However, value investors will care about much more than just this.
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 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.
XELB currently has a forward P/E ratio of 7.07, while TPR has a forward P/E of 17.43. We also note that XELB has a PEG ratio of 0.71. 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. TPR currently has a PEG ratio of 1.49.
Another notable valuation metric for XELB is its P/B ratio of 0.39. 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, TPR has a P/B of 4.28.
Based on these metrics and many more, XELB holds a Value grade of A, while TPR has a Value grade of C.
XELB 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 XELB is likely the superior value option right now.