Investors interested in Textile – Apparel stocks are likely familiar with Ralph Lauren (RL) and V.F. (VFC). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to 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.
Currently, Ralph Lauren has a Zacks Rank of #2 (Buy), while V.F. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RL is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
RL currently has a forward P/E ratio of 15, while VFC has a forward P/E of 18.95. We also note that RL has a PEG ratio of 1.45. 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. VFC currently has a PEG ratio of 1.70.
Another notable valuation metric for RL is its P/B ratio of 2.37. 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, VFC has a P/B of 6.70.
These metrics, and several others, help RL earn a Value grade of A, while VFC has been given a Value grade of D.
RL has seen stronger estimate revision activity and sports more attractive valuation metrics than VFC, so it seems like value investors will conclude that RL is the superior option right now.
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