Investors looking for stocks in the Textile - Apparel sector might want to consider either Crocs (CROX) or Lululemon (LULU). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Crocs has a Zacks Rank of #2 (Buy), while Lululemon has a Zacks Rank of #3 (Hold) right now. This means that CROX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
CROX currently has a forward P/E ratio of 7.56, while LULU has a forward P/E of 13.88. We also note that CROX has a PEG ratio of 1.22. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LULU currently has a PEG ratio of 11.19.
Another notable valuation metric for CROX is its P/B ratio of 4.01. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LULU has a P/B of 4.65.
These metrics, and several others, help CROX earn a Value grade of A, while LULU has been given a Value grade of C.
CROX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CROX is likely the superior value option right now.
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Crocs, Inc. (CROX): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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