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AEO vs. IDEXY: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of American Eagle Outfitters (AEO - Free Report) and Industria de Diseno Textil SA (IDEXY - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, American Eagle Outfitters has a Zacks Rank of #1 (Strong Buy), while Industria de Diseno Textil SA has a Zacks Rank of #3 (Hold). This means that AEO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

AEO currently has a forward P/E ratio of 14.73, while IDEXY has a forward P/E of 21.65. We also note that AEO has a PEG ratio of 0.93. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. IDEXY currently has a PEG ratio of 1.43.

Another notable valuation metric for AEO is its P/B ratio of 2.31. 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, IDEXY has a P/B of 6.79.

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

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


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