RL vs. VFC: Which Stock Is the Better Value Option?
Investors interested in Textile - Apparel stocks are likely familiar with Ralph Lauren (RL) and V.F. (VFC). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ralph Lauren and V.F. are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. Investors should feel comfortable knowing that RL likely has seen a stronger improvement to its earnings outlook than VFC has recently. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
RL currently has a forward P/E ratio of 18.39, while VFC has a forward P/E of 23.25. We also note that RL has a PEG ratio of 1.78. 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. VFC currently has a PEG ratio of 2.05.
Another notable valuation metric for RL is its P/B ratio of 3.03. 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, VFC has a P/B of 8.02.
These are just a few of the metrics contributing to RL's Value grade of B and VFC's Value grade of C.
RL is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that RL is likely the superior value option right now.
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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.