Investors interested in Retail - Apparel and Shoes stocks are likely familiar with Zumiez (ZUMZ - Free Report) and Boot Barn (BOOT - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Zumiez and Boot Barn are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. 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 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ZUMZ currently has a forward P/E ratio of 14.12, while BOOT has a forward P/E of 20.44. We also note that ZUMZ has a PEG ratio of 1.18. 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. BOOT currently has a PEG ratio of 1.36.
Another notable valuation metric for ZUMZ is its P/B ratio of 1.94. 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, BOOT has a P/B of 3.52.
Based on these metrics and many more, ZUMZ holds a Value grade of A, while BOOT has a Value grade of C.
ZUMZ has seen stronger estimate revision activity and sports more attractive valuation metrics than BOOT, so it seems like value investors will conclude that ZUMZ is the superior option right now.