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 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify 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. Investors should feel comfortable knowing that EWCZ likely has seen a stronger improvement to its earnings outlook than ELF has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 8.67, while ELF has a forward P/E of 28.08. We also note that EWCZ has a PEG ratio of 0.47. 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 4.41.
Another notable valuation metric for EWCZ is its P/B ratio of 2.94. 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 4.44.
These metrics, and several others, help EWCZ earn a Value grade of A, while ELF has been given a Value grade of F.
EWCZ sticks out from ELF in both our Zacks Rank and Style Scores models, so value investors will likely feel that EWCZ is the better 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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