Investors interested in Leisure and Recreation Products stocks are likely familiar with Callaway Golf (ELY - Free Report) and Pool Corp. (POOL - 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Callaway Golf has a Zacks Rank of #2 (Buy), while Pool Corp. 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 ELY has 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ELY currently has a forward P/E ratio of 14.08, while POOL has a forward P/E of 24.68. We also note that ELY has a PEG ratio of 0.56. 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. POOL currently has a PEG ratio of 1.05.
Another notable valuation metric for ELY is its P/B ratio of 1.84. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, POOL has a P/B of 15.07.
These are just a few of the metrics contributing to ELY's Value grade of A and POOL's Value grade of C.
ELY has seen stronger estimate revision activity and sports more attractive valuation metrics than POOL, so it seems like value investors will conclude that ELY is the superior option right now.