Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Genesco (GCO) and Stitch Fix (SFIX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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, Genesco has a Zacks Rank of #1 (Strong Buy), while Stitch Fix has a Zacks Rank of #2 (Buy). This means that GCO'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.
GCO currently has a forward P/E ratio of 11.70, while SFIX has a forward P/E of 85.64. We also note that GCO has a PEG ratio of 2.34. 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. SFIX currently has a PEG ratio of 3.81.
Another notable valuation metric for GCO is its P/B ratio of 1.12. 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, SFIX has a P/B of 7.43.
These are just a few of the metrics contributing to GCO's Value grade of B and SFIX's Value grade of C.
GCO 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 GCO is likely the superior value option right now.
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Genesco Inc. (GCO) : Free Stock Analysis Report
Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report
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