Investors looking for stocks in the Shoes and Retail Apparel sector might want to consider either Deckers (DECK - Free Report) or Nike (NKE - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Deckers has a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #3 (Hold) right now. This means that DECK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
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.
DECK currently has a forward P/E ratio of 16.07, while NKE has a forward P/E of 29.05. We also note that DECK has a PEG ratio of 1.30. 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 2.09.
Another notable valuation metric for DECK is its P/B ratio of 3.82. 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 14.
Based on these metrics and many more, DECK holds a Value grade of B, while NKE has a Value grade of D.
DECK stands above NKE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DECK is the superior value option right now.