Investors interested in stocks from the Shoes and Retail Apparel sector have probably already heard of Skechers (SKX - Free Report) and Nike (NKE - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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.
Right now, Skechers is sporting a Zacks Rank of #1 (Strong Buy), while Nike has a Zacks Rank of #4 (Sell). This means that SKX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
SKX currently has a forward P/E ratio of 16.36, while NKE has a forward P/E of 30.13. We also note that SKX has a PEG ratio of 1.09. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NKE currently has a PEG ratio of 2.32.
Another notable valuation metric for SKX is its P/B ratio of 2.43. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NKE has a P/B of 15.18.
Based on these metrics and many more, SKX holds a Value grade of B, while NKE has a Value grade of F.
SKX stands above NKE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SKX is the superior value option right now.