Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Franchise Group (NASDAQ:FRG) and Ollie's Bargain Outlet (OLLI). 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.
Currently, Franchise Group has a Zacks Rank of #2 (Buy), while Ollie's Bargain Outlet has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that FRG likely has seen a stronger improvement to its earnings outlook than OLLI has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FRG currently has a forward P/E ratio of 11.50, while OLLI has a forward P/E of 31.60. We also note that FRG has a PEG ratio of 0.77. 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. OLLI currently has a PEG ratio of 2.50.
Another notable valuation metric for FRG is its P/B ratio of 3.76. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, OLLI has a P/B of 4.26.
These metrics, and several others, help FRG earn a Value grade of A, while OLLI has been given a Value grade of C.
FRG stands above OLLI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FRG is the superior value option right now.
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