Investors interested in Retail - Apparel and Shoes stocks are likely familiar with Victoria's Secret (VSCO) and On Holding (ONON). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Victoria's Secret and On Holding have a Zacks Rank of #1 (Strong Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture 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.
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.
VSCO currently has a forward P/E ratio of 20.09, while ONON has a forward P/E of 51.72. We also note that VSCO has a PEG ratio of 2.18. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ONON currently has a PEG ratio of 2.20.
Another notable valuation metric for VSCO is its P/B ratio of 6.15. 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 16.14.
These metrics, and several others, help VSCO earn a Value grade of A, while ONON has been given a Value grade of F.
Both VSCO and ONON are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that VSCO is the superior value option right now.
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Victoria's Secret & Co. (VSCO): 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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