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Investors looking for stocks in the Retail - Apparel and Shoes sector might want to consider either Tapestry (TPR) or On Holding (ONON). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Tapestry and On Holding have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle 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.
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.
TPR currently has a forward P/E ratio of 15, while ONON has a forward P/E of 39.83. We also note that TPR has a PEG ratio of 1.71. 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. ONON currently has a PEG ratio of 1.91.
Another notable valuation metric for TPR is its P/B ratio of 11.41. 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, ONON has a P/B of 18.34.
These metrics, and several others, help TPR earn a Value grade of B, while ONON has been given a Value grade of F.
Both TPR and ONON are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TPR is the superior value option right now.
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Tapestry, Inc. (TPR) : Free Stock Analysis Report
On Holding AG (ONON) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).