PBH vs. LUXTY: Which Stock Is the Better Value Option?

Investors interested in stocks from the Consumer Products – Discretionary sector have probably already heard of Prestige Brands (PBH) and Luxottica (LUXTY). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Prestige Brands has a Zacks Rank of #2 (Buy), while Luxottica 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 PBH has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

PBH currently has a forward P/E ratio of 10.48, while LUXTY has a forward P/E of 24.51. We also note that PBH has a PEG ratio of 1.50. 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. LUXTY currently has a PEG ratio of 4.84.

Another notable valuation metric for PBH is its P/B ratio of 1.31. 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, LUXTY has a P/B of 4.05.

Based on these metrics and many more, PBH holds a Value grade of A, while LUXTY has a Value grade of D.

PBH has seen stronger estimate revision activity and sports more attractive valuation metrics than LUXTY, so it seems like value investors will conclude that PBH is the superior option right now.

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