TPX vs. RH: Which Stock Is the Better Value Option?
Investors interested in Retail - Home Furnishings stocks are likely familiar with Tempur Sealy (TPX) and Restoration Hardware (RH). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Tempur Sealy and Restoration Hardware are holding a Zacks Rank of # 1 (Strong Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle 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.
TPX currently has a forward P/E ratio of 15.18, while RH has a forward P/E of 22.17. We also note that TPX has a PEG ratio of 0.59. 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. RH currently has a PEG ratio of 1.04.
Another notable valuation metric for TPX is its P/B ratio of 18.33. 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, RH has a P/B of 56.86.
These metrics, and several others, help TPX earn a Value grade of B, while RH has been given a Value grade of D.
Both TPX and RH 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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Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
RH (RH): 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.