Investors looking for stocks in the Shoes and Retail Apparel sector might want to consider either Adidas AG (ADDYY) or Nike (NKE). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Adidas AG has a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #4 (Sell). This means that ADDYY'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 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ADDYY currently has a forward P/E ratio of 23.11, while NKE has a forward P/E of 45.51. We also note that ADDYY has a PEG ratio of 0.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NKE currently has a PEG ratio of 2.79.
Another notable valuation metric for ADDYY is its P/B ratio of 5.62. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NKE has a P/B of 8.57.
Based on these metrics and many more, ADDYY holds a Value grade of B, while NKE has a Value grade of D.
ADDYY has seen stronger estimate revision activity and sports more attractive valuation metrics than NKE, so it seems like value investors will conclude that ADDYY is the superior 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.
