Investors looking for stocks in the Cosmetics sector might want to consider either European Wax Center, Inc. (EWCZ) or e.l.f. Beauty (ELF). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, European Wax Center, Inc. has a Zacks Rank of #1 (Strong Buy), while e.l.f. Beauty has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that EWCZ likely has seen a stronger improvement to its earnings outlook than ELF has recently. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
EWCZ currently has a forward P/E ratio of 12.55, while ELF has a forward P/E of 21.68. We also note that EWCZ has a PEG ratio of 0.91. 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. ELF currently has a PEG ratio of 4.75.
Another notable valuation metric for EWCZ is its P/B ratio of 2.35. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ELF has a P/B of 5.44.
These are just a few of the metrics contributing to EWCZ's Value grade of A and ELF's 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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).
Zacks Investment Research
