Investors with an interest in Retail – Apparel and Shoes stocks have likely encountered both Designer Brands (DBI) and Canada Goose (GOOS). 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.
Right now, Designer Brands is sporting a Zacks Rank of #2 (Buy), while Canada Goose has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DBI has an improving earnings 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DBI currently has a forward P/E ratio of 8.76, while GOOS has a forward P/E of 30.28. We also note that DBI has a PEG ratio of 0.58. 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. GOOS currently has a PEG ratio of 1.37.
Another notable valuation metric for DBI is its P/B ratio of 1.64. 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, GOOS has a P/B of 14.04.
These metrics, and several others, help DBI earn a Value grade of A, while GOOS has been given a Value grade of D.
DBI has seen stronger estimate revision activity and sports more attractive valuation metrics than GOOS, so it seems like value investors will conclude that DBI is the superior option right now.
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