URBN vs. BOOT: Which Stock Is the Better Value Option?

Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Urban Outfitters (URBN) or Boot Barn (BOOT). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Urban Outfitters has a Zacks Rank of #1 (Strong Buy), while Boot Barn has a Zacks Rank of #4 (Sell). This means that URBN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

URBN currently has a forward P/E ratio of 14.07, while BOOT has a forward P/E of 25.89. We also note that URBN has a PEG ratio of 1.17. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BOOT currently has a PEG ratio of 1.90.

Another notable valuation metric for URBN is its P/B ratio of 2.64. 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, BOOT has a P/B of 4.38.

These are just a few of the metrics contributing to URBN's Value grade of A and BOOT's Value grade of D.

URBN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that URBN is likely the superior value option right now.

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

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