Investors interested in Textile - Apparel stocks are likely familiar with Gildan Activewear (GIL) and Lululemon (LULU). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Gildan Activewear has a Zacks Rank of #2 (Buy), while Lululemon has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that GIL likely has seen a stronger improvement to its earnings outlook than LULU has recently. But this is only part of the picture for value investors.

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.

GIL currently has a forward P/E ratio of 11.54, while LULU has a forward P/E of 17.13. We also note that GIL has a PEG ratio of 1.28. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LULU currently has a PEG ratio of 2.15.

Another notable valuation metric for GIL is its P/B ratio of 4.21. 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 7.20.

These metrics, and several others, help GIL earn a Value grade of B, while LULU has been given a Value grade of C.

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

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Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report

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

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

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