Investors interested in stocks from the Cosmetics sector have probably already heard of European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). 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.
European Wax Center, Inc. and e.l.f. Beauty are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EWCZ 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.
EWCZ currently has a forward P/E ratio of 5.98, while ELF has a forward P/E of 29.64. We also note that EWCZ has a PEG ratio of 0.33. 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. ELF currently has a PEG ratio of 4.96.
Another notable valuation metric for EWCZ is its P/B ratio of 2.03. 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, ELF has a P/B of 4.43.
Based on these metrics and many more, EWCZ holds a Value grade of A, while ELF has a Value grade of F.
EWCZ stands above ELF thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EWCZ is the superior value option right now.
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European Wax Center, Inc. (EWCZ): Free Stock Analysis Report e.l.f. Beauty (ELF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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