Investors with an interest in Cosmetics stocks have likely encountered both European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, European Wax Center, Inc. is sporting a Zacks Rank of #1 (Strong Buy), while e.l.f. Beauty has a Zacks Rank of #3 (Hold). This means that EWCZ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
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 8.57, while ELF has a forward P/E of 26.91. We also note that EWCZ has a PEG ratio of 0.47. 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. ELF currently has a PEG ratio of 6.18.
Another notable valuation metric for EWCZ is its P/B ratio of 2.95. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ELF has a P/B of 6.65.
These metrics, and several others, help EWCZ earn a Value grade of A, while ELF has been given a Value grade of F.
EWCZ has seen stronger estimate revision activity and sports more attractive valuation metrics than ELF, so it seems like value investors will conclude that EWCZ is the superior 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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