Investors looking for stocks in the Textile - Apparel sector might want to consider either Ralph Lauren (RL) or Lululemon (LULU). 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.

Right now, both Ralph Lauren and Lululemon are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

RL currently has a forward P/E ratio of 22.50, while LULU has a forward P/E of 26.06. We also note that RL has a PEG ratio of 1.63. 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. LULU currently has a PEG ratio of 2.44.

Another notable valuation metric for RL is its P/B ratio of 6.57. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LULU has a P/B of 12.21.

Based on these metrics and many more, RL holds a Value grade of B, while LULU has a Value grade of D.

Both RL and LULU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RL is the superior value option right now.

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Ralph Lauren Corporation (RL) : Free Stock Analysis Report

lululemon athletica inc. (LULU) : Free Stock Analysis Report

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