Investors interested in stocks from the Cosmetics sector have probably already heard of European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
European Wax Center, Inc. and e.l.f. Beauty are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EWCZ is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
EWCZ currently has a forward P/E ratio of 16.55, while ELF has a forward P/E of 20.99. We also note that EWCZ has a PEG ratio of 1.20. 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. ELF currently has a PEG ratio of 4.60.
Another notable valuation metric for EWCZ is its P/B ratio of 3.72. 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, ELF has a P/B of 5.14.
These metrics, and several others, help EWCZ earn a Value grade of B, while ELF has been given a Value grade of F.
EWCZ stands above ELF thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EWCZ is the superior value option right now.
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e.l.f. Beauty (ELF) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
