Investors with an interest in Retail - Home Furnishings stocks have likely encountered both Ethan Allen (ETH - Free Report) and Tempur Sealy (TPX - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Ethan Allen is sporting a Zacks Rank of #2 (Buy), while Tempur Sealy has a Zacks Rank of #3 (Hold). This means that ETH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
ETH currently has a forward P/E ratio of 13.35, while TPX has a forward P/E of 18.88. We also note that ETH has a PEG ratio of 0.89. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TPX currently has a PEG ratio of 0.92.
Another notable valuation metric for ETH is its P/B ratio of 1.55. 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, TPX has a P/B of 13.76.
These metrics, and several others, help ETH earn a Value grade of A, while TPX has been given a Value grade of C.
ETH 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 ETH is likely the superior value option right now.