ANF vs. TPR: Which Stock Is the Better Value Option?

Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Abercrombie & Fitch (ANF) and Tapestry (TPR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Abercrombie & Fitch has a Zacks Rank of #1 (Strong Buy), while Tapestry has a Zacks Rank of #3 (Hold). This means that ANF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

ANF currently has a forward P/E ratio of 12.92, while TPR has a forward P/E of 15.45. We also note that ANF has a PEG ratio of 1.29. 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. TPR currently has a PEG ratio of 1.55.

Another notable valuation metric for ANF is its P/B ratio of 4.66. 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, TPR has a P/B of 35.79.

These are just a few of the metrics contributing to ANF's Value grade of A and TPR's Value grade of C.

ANF has seen stronger estimate revision activity and sports more attractive valuation metrics than TPR, so it seems like value investors will conclude that ANF is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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