EWCZ or ELF: Which Is the Better Value Stock Right Now?

Investors with an interest in Cosmetics stocks have likely encountered both European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, European Wax Center, Inc. has a Zacks Rank of #2 (Buy), while e.l.f. Beauty has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that EWCZ likely has seen a stronger improvement to its earnings outlook than ELF has recently. But this is just one factor that value investors are interested in.

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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

EWCZ currently has a forward P/E ratio of 5.29, while ELF has a forward P/E of 24.81. We also note that EWCZ has a PEG ratio of 0.29. 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. ELF currently has a PEG ratio of 3.91.

Another notable valuation metric for EWCZ is its P/B ratio of 1.93. 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, ELF has a P/B of 3.79.

These are just a few of the metrics contributing to EWCZ's Value grade of A and ELF's Value grade of F.

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

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

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