Investors looking for stocks in the Retail - Home Furnishings sector might want to consider either Tempur Sealy (TPX) or Home Depot (HD). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Tempur Sealy and Home Depot are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
TPX currently has a forward P/E ratio of 21.90, while HD has a forward P/E of 27.25. We also note that TPX has a PEG ratio of 2.02. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HD currently has a PEG ratio of 4.34.
Another notable valuation metric for TPX is its P/B ratio of 19.42. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HD has a P/B of 70.73.
Based on these metrics and many more, TPX holds a Value grade of B, while HD has a Value grade of C.
Both TPX and HD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TPX is the superior value option right now.
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See Stocks Now >>Tempur Sealy International, Inc. (TPX) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : 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.
