Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Zumiez (ZUMZ - Free Report) or Stitch Fix (SFIX - 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.
Right now, Zumiez is sporting a Zacks Rank of #2 (Buy), while Stitch Fix has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ZUMZ is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
ZUMZ currently has a forward P/E ratio of 13.41, while SFIX has a forward P/E of 170.14. We also note that ZUMZ has a PEG ratio of 1.07. 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. SFIX currently has a PEG ratio of 7.56.
Another notable valuation metric for ZUMZ is its P/B ratio of 1.70. 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, SFIX has a P/B of 8.04.
These metrics, and several others, help ZUMZ earn a Value grade of A, while SFIX has been given a Value grade of D.
ZUMZ has seen stronger estimate revision activity and sports more attractive valuation metrics than SFIX, so it seems like value investors will conclude that ZUMZ is the superior option right now.