Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of Arhaus, Inc. (ARHS) and Tractor Supply (TSCO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Arhaus, Inc. has a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ARHS has an improving earnings outlook. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ARHS currently has a forward P/E ratio of 8.91, while TSCO has a forward P/E of 20.88. We also note that ARHS has a PEG ratio of 0.64. 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. TSCO currently has a PEG ratio of 2.07.
Another notable valuation metric for ARHS is its P/B ratio of 9.01. 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, TSCO has a P/B of 12.42.
Based on these metrics and many more, ARHS holds a Value grade of A, while TSCO has a Value grade of C.
ARHS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ARHS is likely the superior value option right now.