Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Gap (GAP) or Deckers (DECK). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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, Gap is sporting a Zacks Rank of #2 (Buy), while Deckers has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GAP likely has seen a stronger improvement to its earnings outlook than DECK 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GAP currently has a forward P/E ratio of 11.61, while DECK has a forward P/E of 12.98. We also note that GAP has a PEG ratio of 2.76. 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. DECK currently has a PEG ratio of 3.75.
Another notable valuation metric for GAP is its P/B ratio of 2.52. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DECK has a P/B of 4.91.
These metrics, and several others, help GAP earn a Value grade of A, while DECK has been given a Value grade of C.
GAP sticks out from DECK in both our Zacks Rank and Style Scores models, so value investors will likely feel that GAP is the better option right now.
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The Gap, Inc. (GAP): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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