Investors interested in Shoes and Retail Apparel stocks are likely familiar with 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.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Adidas AG is sporting a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #4 (Sell). This means that ADDYY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
ADDYY currently has a forward P/E ratio of 13.94, while NKE has a forward P/E of 42.17. We also note that ADDYY has a PEG ratio of 0.38. 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 3.38.
Another notable valuation metric for ADDYY is its P/B ratio of 4.27. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NKE has a P/B of 6.84.
Based on these metrics and many more, ADDYY holds a Value grade of B, while NKE has a Value grade of D.
ADDYY has seen stronger estimate revision activity and sports more attractive valuation metrics than NKE, so it seems like value investors will conclude that ADDYY is the superior 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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