Investors interested in Textile - Apparel stocks are likely familiar with Ralph Lauren (RL - Free Report) and V.F. (VFC - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Ralph Lauren is sporting a Zacks Rank of #2 (Buy), while V.F. has a Zacks Rank of #4 (Sell). This means that RL'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 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.
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.
RL currently has a forward P/E ratio of 14.68, while VFC has a forward P/E of 24.94. We also note that RL has a PEG ratio of 1.75. 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. VFC currently has a PEG ratio of 2.18.
Another notable valuation metric for RL is its P/B ratio of 3.03. 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, VFC has a P/B of 7.21.
These are just a few of the metrics contributing to RL's Value grade of B and VFC's Value grade of C.
RL 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 RL is likely the superior value option right now.