Investors with an interest in Shoes and Retail Apparel stocks have likely encountered both Adidas AG (ADDYY) and Nike (NKE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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, Adidas AG is sporting a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that ADDYY likely has seen a stronger improvement to its earnings outlook than NKE has recently. However, value investors will care about much more than just this.
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 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.
ADDYY currently has a forward P/E ratio of 14.32, while NKE has a forward P/E of 42.14. We also note that ADDYY has a PEG ratio of 0.39. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NKE currently has a PEG ratio of 3.38.
Another notable valuation metric for ADDYY is its P/B ratio of 4.39. 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 6.83.
These are just a few of the metrics contributing to ADDYY's Value grade of B and NKE's Value grade of D.
ADDYY 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 ADDYY is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
