WOOF vs. ULTA: Which Stock Is the Better Value Option?
Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of Petco Health & Wellness (WOOF) and Ulta $ULTA Beauty (ULTA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Petco Health & Wellness and Ulta Beauty are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WOOF is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
WOOF currently has a forward P/E ratio of 14.79, while ULTA has a forward P/E of 18.33. We also note that WOOF has a PEG ratio of 1.34. 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. ULTA currently has a PEG ratio of 1.81.
Another notable valuation metric for WOOF is its P/B ratio of 0.77. 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, ULTA has a P/B of 8.25.
Based on these metrics and many more, WOOF holds a Value grade of B, while ULTA has a Value grade of C.
WOOF has seen stronger estimate revision activity and sports more attractive valuation metrics than ULTA, so it seems like value investors will conclude that WOOF is the superior option right now.
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