Investors looking for stocks in the Shoes and Retail Apparel sector might want to consider either Skechers (SKX) or Nike (NKE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Skechers has a Zacks Rank of #2 (Buy), while Nike has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SKX 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
SKX currently has a forward P/E ratio of 14.46, while NKE has a forward P/E of 25.89. We also note that SKX has a PEG ratio of 0.51. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NKE currently has a PEG ratio of 1.64.
Another notable valuation metric for SKX is its P/B ratio of 1.81. 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, NKE has a P/B of 10.47.
These are just a few of the metrics contributing to SKX's Value grade of A and NKE's Value grade of D.
SKX has seen stronger estimate revision activity and sports more attractive valuation metrics than NKE, so it seems like value investors will conclude that SKX is the superior option right now.
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