Yahoo Finance RL vs. LULU: Which Stock Is the Better Value Option?
Investors interested in stocks from the Textile - Apparel sector have probably already heard of Ralph Lauren (RL) and Lululemon (LULU). 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.
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.
Ralph Lauren and Lululemon are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that RL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
RL currently has a forward P/E ratio of 12.98, while LULU has a forward P/E of 32.07. We also note that RL has a PEG ratio of 1.40. 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. LULU currently has a PEG ratio of 1.60.
Another notable valuation metric for RL is its P/B ratio of 3.21. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LULU has a P/B of 14.29.
These are just a few of the metrics contributing to RL's Value grade of A and LULU's Value grade of D.
RL sticks out from LULU in both our Zacks Rank and Style Scores models, so value investors will likely feel that RL is the better option right now.
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Ralph Lauren Corporation (RL) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
