COTY vs. EL: Which Stock Is the Better Value Option?

Investors interested in stocks from the Cosmetics sector have probably already heard of Coty (COTY) and Estee Lauder (EL). 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.

Currently, Coty has a Zacks Rank of #2 (Buy), while Estee Lauder has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that COTY likely has seen a stronger improvement to its earnings outlook than EL has recently. But this is just one piece of the puzzle 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.

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.

COTY currently has a forward P/E ratio of 10.13, while EL has a forward P/E of 42.38. We also note that COTY has a PEG ratio of 0.68. 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. EL currently has a PEG ratio of 6.47.

Another notable valuation metric for COTY is its P/B ratio of 1.21. 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, EL has a P/B of 7.57.

These are just a few of the metrics contributing to COTY's Value grade of A and EL's Value grade of D.

COTY stands above EL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that COTY is the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research