Investors with an interest in Retail - Apparel and Shoes stocks have likely encountered both Gap (GAP) and 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Gap is sporting a Zacks Rank of #2 (Buy), while Deckers has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GAP has an improving earnings outlook. 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 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.
GAP currently has a forward P/E ratio of 12.48, while DECK has a forward P/E of 15.72. We also note that GAP has a PEG ratio of 2.97. 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 4.54.
Another notable valuation metric for GAP is its P/B ratio of 2.72. 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, DECK has a P/B of 5.95.
These metrics, and several others, help GAP earn a Value grade of A, while DECK has been given a Value grade of C.
GAP 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 GAP is likely the superior value 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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