Investors with an interest in Textile - Apparel stocks have likely encountered both Ralph Lauren (RL) and Lululemon (LULU). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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, both Ralph Lauren and Lululemon are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
RL currently has a forward P/E ratio of 19.79, while LULU has a forward P/E of 27.11. We also note that RL has a PEG ratio of 1.72. 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. LULU currently has a PEG ratio of 2.72.
Another notable valuation metric for RL is its P/B ratio of 5.90. 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, LULU has a P/B of 11.73.
These are just a few of the metrics contributing to RL's Value grade of B and LULU's Value grade of D.
Both RL and LULU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RL is the superior value option right now.
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lululemon athletica inc. (LULU) : 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.
