Investors with an interest in Shoes and Retail Apparel stocks have likely encountered both Adidas AG (ADDYY) and Nike (NKE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Adidas AG is sporting a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ADDYY is likely seeing its earnings outlook improve to a greater extent. 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.
ADDYY currently has a forward P/E ratio of 15.70, while NKE has a forward P/E of 41.78. We also note that ADDYY has a PEG ratio of 0.39. 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. NKE currently has a PEG ratio of 2.81.
Another notable valuation metric for ADDYY is its P/B ratio of 4.8. 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, NKE has a P/B of 6.86.
These metrics, and several others, help ADDYY earn a Value grade of B, while NKE has been given a Value grade of D.
ADDYY sticks out from NKE in both our Zacks Rank and Style Scores models, so value investors will likely feel that ADDYY is the better option right now.
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Adidas AG (ADDYY): Free Stock Analysis Report NIKE, Inc. (NKE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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