Investors with an interest in Textile - Apparel stocks have likely encountered both Kontoor Brands (KTB) and Cintas (CTAS). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Kontoor Brands is sporting a Zacks Rank of #2 (Buy), while Cintas has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KTB likely has seen a stronger improvement to its earnings outlook than CTAS has recently. 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.
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.
KTB currently has a forward P/E ratio of 13.40, while CTAS has a forward P/E of 37.74. We also note that KTB has a PEG ratio of 1.68. 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. CTAS currently has a PEG ratio of 3.15.
Another notable valuation metric for KTB is its P/B ratio of 7.71. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CTAS has a P/B of 15.43.
These metrics, and several others, help KTB earn a Value grade of B, while CTAS has been given a Value grade of F.
KTB 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 KTB is likely the superior value option right now.
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Kontoor Brands, Inc. (KTB): Free Stock Analysis Report Cintas Corporation (CTAS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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