Investors interested in stocks from the Textile - Apparel sector have probably already heard of Crocs (CROX - Free Report) and Lululemon (LULU - 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.
Crocs has a Zacks Rank of #1 (Strong Buy), while Lululemon has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CROX is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
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.
CROX currently has a forward P/E ratio of 17.74, while LULU has a forward P/E of 38.26. We also note that CROX has a PEG ratio of 1.18. 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. LULU currently has a PEG ratio of 2.08.
Another notable valuation metric for CROX is its P/B ratio of 15.44. 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 17.12.
Based on these metrics and many more, CROX holds a Value grade of B, while LULU has a Value grade of F.
CROX has seen stronger estimate revision activity and sports more attractive valuation metrics than LULU, so it seems like value investors will conclude that CROX is the superior option right now.