Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Burberry Group PLC (BURBY) and Industria de Diseno Textil SA (IDEXY). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Burberry Group PLC is sporting a Zacks Rank of #2 (Buy), while Industria de Diseno Textil SA has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BURBY has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
BURBY currently has a forward P/E ratio of 16.73, while IDEXY has a forward P/E of 21.92. We also note that BURBY has a PEG ratio of 1.87. 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. IDEXY currently has a PEG ratio of 2.08.
Another notable valuation metric for BURBY is its P/B ratio of 4.81. 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, IDEXY has a P/B of 6.25.
Based on these metrics and many more, BURBY holds a Value grade of B, while IDEXY has a Value grade of C.
BURBY stands above IDEXY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BURBY is the superior value option right now.
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