Investors interested in Retail - Apparel and Shoes stocks are likely familiar with Gap (GAP) and On Holding (ONON). 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Gap and On Holding are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GAP is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GAP currently has a forward P/E ratio of 9.19, while ONON has a forward P/E of 40.25. We also note that GAP has a PEG ratio of 1.47. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ONON currently has a PEG ratio of 1.92.
Another notable valuation metric for GAP is its P/B ratio of 2.51. 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, ONON has a P/B of 19.08.
These metrics, and several others, help GAP earn a Value grade of A, while ONON has been given a Value grade of F.
GAP has seen stronger estimate revision activity and sports more attractive valuation metrics than ONON, so it seems like value investors will conclude that GAP is the superior option right now.
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The Gap, Inc. (GAP): Free Stock Analysis Report On Holding AG (ONON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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