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RL vs. LULU: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Textile - Apparel sector have probably already heard of Ralph Lauren (RL - Free Report) and Lululemon (LULU - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Ralph Lauren and Lululemon are both sporting a Zacks Rank of # 2 (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 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 17.48, while LULU has a forward P/E of 33.16. We also note that RL has a PEG ratio of 1.70. 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. LULU currently has a PEG ratio of 1.72.

Another notable valuation metric for RL is its P/B ratio of 2.88. 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, LULU has a P/B of 13.73.

These are just a few of the metrics contributing to RL's Value grade of A and LULU's Value grade of D.

Both RL and LULU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RL is the superior value option right now.




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Ralph Lauren Corporation (RL) - free report >>

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