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ITOCY vs. ULTA: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Retail - Miscellaneous sector might want to consider either Itochu Corp. (ITOCY - Free Report) or Ulta Beauty (ULTA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Itochu Corp. has a Zacks Rank of #2 (Buy), while Ulta Beauty has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ITOCY is likely seeing its earnings outlook improve to a greater extent. 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 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.

ITOCY currently has a forward P/E ratio of 8, while ULTA has a forward P/E of 21.62. We also note that ITOCY has a PEG ratio of 0.52. 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 2.11.

Another notable valuation metric for ITOCY is its P/B ratio of 1.29. 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, ULTA has a P/B of 14.15.

Based on these metrics and many more, ITOCY holds a Value grade of A, while ULTA has a Value grade of C.

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


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