Investors interested in stocks from the Retail - Apparel and Shoes sector have probably already heard of Urban Outfitters (URBN) and Industria de Diseno Textil SA (IDEXY). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Urban Outfitters has a Zacks Rank of #2 (Buy), while Industria de Diseno Textil SA 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 URBN 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

URBN currently has a forward P/E ratio of 11.27, while IDEXY has a forward P/E of 21.79. We also note that URBN has a PEG ratio of 1.29. 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 2.50.

Another notable valuation metric for URBN is its P/B ratio of 1.96. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, IDEXY has a P/B of 7.35.

These metrics, and several others, help URBN earn a Value grade of A, while IDEXY has been given a Value grade of D.

URBN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that URBN is likely the superior value option right now.

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Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report

Industria de Diseno Textil SA (IDEXY) : Free Stock Analysis Report

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

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