Investors with an interest in Retail - Miscellaneous stocks have likely encountered both ODP Corp. (ODP) and Ulta Beauty (ULTA). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
ODP Corp. and Ulta Beauty are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that ODP'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 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.
ODP currently has a forward P/E ratio of 5.99, while ULTA has a forward P/E of 19.64. We also note that ODP has a PEG ratio of 0.43. 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. ULTA currently has a PEG ratio of 2.73.
Another notable valuation metric for ODP is its P/B ratio of 0.69. 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, ULTA has a P/B of 8.55.
These metrics, and several others, help ODP earn a Value grade of A, while ULTA has been given a Value grade of C.
ODP has seen stronger estimate revision activity and sports more attractive valuation metrics than ULTA, so it seems like value investors will conclude that ODP is the superior option right now.
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The ODP Corporation (ODP): Free Stock Analysis Report Boston Scientific Corporation (BSX): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis Report W.R. Berkley Corporation (WRB): Free Stock Analysis Report Ulta Beauty Inc. (ULTA): Free Stock Analysis Report Danone (DANOY): Free Stock Analysis Report Wheaton Precious Metals Corp. (WPM): Free Stock Analysis Report Atour Lifestyle Holdings Limited Sponsored ADR (ATAT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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