Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Ermenegildo Zegna N.V. (ZGN) and On Holding (ONON). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Ermenegildo Zegna N.V. and On Holding are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ZGN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
ZGN currently has a forward P/E ratio of 21.43, while ONON has a forward P/E of 61.84. We also note that ZGN has a PEG ratio of 2.20. 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. ONON currently has a PEG ratio of 3.05.
Another notable valuation metric for ZGN is its P/B ratio of 3.58. 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, ONON has a P/B of 17.01.
These metrics, and several others, help ZGN earn a Value grade of B, while ONON has been given a Value grade of F.
ZGN has seen stronger estimate revision activity and sports more attractive valuation metrics than ONON, so it seems like value investors will conclude that ZGN is the superior option right now.
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Ermenegildo Zegna N.V. (ZGN): Free Stock Analysis Report On Holding AG (ONON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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