Investors with an interest in Textile - Apparel stocks have likely encountered both Crocs (CROX) and Lululemon (LULU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Crocs is sporting a Zacks Rank of #2 (Buy), while Lululemon 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 CROX 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 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.
CROX currently has a forward P/E ratio of 6.21, while LULU has a forward P/E of 13.52. We also note that CROX has a PEG ratio of 0.97. 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. LULU currently has a PEG ratio of 10.90.
Another notable valuation metric for CROX is its P/B ratio of 3.34. 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 4.54.
Based on these metrics and many more, CROX holds a Value grade of A, while LULU has a Value grade of C.
CROX has seen stronger estimate revision activity and sports more attractive valuation metrics than LULU, so it seems like value investors will conclude that CROX is the superior 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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