BJ vs. HESAY: Which Stock Is the Better Value Option?

Investors looking for stocks in the Consumer Products - Staples sector might want to consider either BJ's Wholesale Club (BJ) or Hermes International SA - Unsponsored ADR (HESAY). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

BJ's Wholesale Club and Hermes International SA - Unsponsored ADR are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.

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.

BJ currently has a forward P/E ratio of 26.01, while HESAY has a forward P/E of 55.44. We also note that BJ has a PEG ratio of 3.28. 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. HESAY currently has a PEG ratio of 5.79.

Another notable valuation metric for BJ is its P/B ratio of 7.48. 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, HESAY has a P/B of 15.51.

These are just a few of the metrics contributing to BJ's Value grade of B and HESAY's Value grade of F.

Both BJ and HESAY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BJ is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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