Markets

DKS vs. ULTA: Which Stock Is the Better Value Option?

Investors interested in Retail - Miscellaneous stocks are likely familiar with Dick's Sporting Goods (DKS) and Ulta Beauty (ULTA). 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.

Currently, Dick's Sporting Goods has a Zacks Rank of #1 (Strong Buy), while Ulta Beauty has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DKS likely has seen a stronger improvement to its earnings outlook than ULTA has recently. 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.

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.

DKS currently has a forward P/E ratio of 16.58, while ULTA has a forward P/E of 74.67. We also note that DKS has a PEG ratio of 3.45. 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. ULTA currently has a PEG ratio of 8.30.

Another notable valuation metric for DKS is its P/B ratio of 2.91. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ULTA has a P/B of 7.60.

These are just a few of the metrics contributing to DKS's Value grade of A and ULTA's Value grade of C.

DKS has seen stronger estimate revision activity and sports more attractive valuation metrics than ULTA, so it seems like value investors will conclude that DKS is the superior option right now.


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DICKS Sporting Goods, Inc. (DKS): Free Stock Analysis Report
 
Ulta Beauty Inc. (ULTA): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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