Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Canada Goose (GOOS) and Industria de Diseno Textil SA (IDEXY). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Canada Goose has a Zacks Rank of #2 (Buy), while Industria de Diseno Textil SA has a Zacks Rank of #3 (Hold). This means that GOOS'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 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.
GOOS currently has a forward P/E ratio of 12.81, while IDEXY has a forward P/E of 22.83. We also note that GOOS has a PEG ratio of 0.71. 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. IDEXY currently has a PEG ratio of 3.04.
Another notable valuation metric for GOOS is its P/B ratio of 2.71. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, IDEXY has a P/B of 7.48.
These metrics, and several others, help GOOS earn a Value grade of A, while IDEXY has been given a Value grade of C.
GOOS stands above IDEXY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GOOS is 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.
