Investors looking for stocks in the Retail - Home Furnishings sector might want to consider either Lovesac (LOVE) or Somnigroup International (SGI). 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 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.
Currently, Lovesac has a Zacks Rank of #1 (Strong Buy), while Somnigroup International has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LOVE has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
LOVE currently has a forward P/E ratio of 24.26, while SGI has a forward P/E of 26.18. We also note that LOVE has a PEG ratio of 0.69. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SGI currently has a PEG ratio of 1.70.
Another notable valuation metric for LOVE is its P/B ratio of 1.46. 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, SGI has a P/B of 4.95.
These metrics, and several others, help LOVE earn a Value grade of A, while SGI has been given a Value grade of D.
LOVE sticks out from SGI in both our Zacks Rank and Style Scores models, so value investors will likely feel that LOVE is the better option right now.
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Today, See These 5 Potential Home Runs >>The Lovesac Company (LOVE) : Free Stock Analysis Report
Somnigroup International Inc. (SGI) : Free Stock Analysis Report
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.
