Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Retailers - Apparel & Accessories industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Retailers - Apparel & Accessories Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Retailers - Apparel & Accessories Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Retailers - Apparel & Accessories industry for Thursday, May 30, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Retailers - Apparel & Accessories industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Designer Brands Inc’s Value Grade

Value Grade:

Designer Brands Inc. is a designer, producer and retailer of footwear brands and accessories. The Company operates through three segments: the U.S. Retail segment, the Canada Retail segment, and the Brand Portfolio segment. The U.S. Retail segment operates the DSW Designer Shoe Warehouse (DSW) banner through its direct-to-consumer United States stores and e-commerce site. The Canada Retail segment operates The Shoe Company and DSW banners through its direct-to-consumer Canada stores and e-commerce sites. The Brand Portfolio segment is engaged in sale of wholesale products to retailers and international distributors; commissions for serving retailers as the design and buying agent for products under private labels; and the sale of branded products. The Company sells its branded products on direct-to-consumer e-commerce sites for the Vince Camuto, Keds, Hush Puppies, and Topo brands. The Company’s Topo business designs specialty athletic footwear.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Designer Brands Inc has a Value Score of 87, which is considered to be undervalued.

When you look at Designer Brands Inc’s price-to-sales ratio at 0.17 compared to the industry median at 0.47, this company has a lower price relative to revenue compared to its peers. This could make Designer Brands Inc’s stock more attractive for value investors.

Designer Brands Inc’s price-earnings ratio is 25.49 compared to the industry median at 13.96. This means it has a higher share price relative to earnings compared to its peers. This could make Designer Brands Inc less attractive for value investors.

Now, let’s assess Designer Brands Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.0, when compared to the industry median of 7.0, the company may be considered fairly valued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Designer Brands Inc’s shareholder yield is higher than its industry median ratio of 1.20%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Designer Brands Inc’s price-to-book ratio is lower than its industry median ratio of 2.13. This could make Designer Brands Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Designer Brands Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Designer Brands Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 13.38. This could make Designer Brands Inc more attractive because the lower P/FCF ratio indicates that Designer Brands Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Hibbett Inc’s Value Grade

Value Grade:

Hibbett, Inc. is an athletic-inspired fashion retailer. The Company operates approximately 1,169 retail stores in 36 states, composed of 960 Hibbett stores, 193 City Gear stores and 16 Sports Additions athletic shoe stores. Its Hibbett stores average 5,800 square feet and are located primarily in strip centers, which are usually near a chain retailer. Its City Gear stores average 5,200 square feet and are located primarily in strip centers. Its Sports Additions stores average 2,900 square feet with the majority located in malls and usually near a Hibbett store. Its store base consisted of 912 stores located in strip centers, 32 free-standing stores and 225 enclosed mall locations. It offers personalized customer service and access to coveted footwear and apparel from top brands like Nike, Jordan and Adidas. It maintains a full-line wholesale and logistics facility in Alabaster, Alabama (a suburb of Birmingham) where the Company receives and ships its various merchandise.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hibbett Inc has a Value Score of 79, which is considered to be undervalued.

Hibbett Inc’s price-earnings ratio is 10.6 compared to the industry median at 14.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Hibbett Inc more attractive for value investors.

Hibbett Inc’s price-to-book ratio is lower than its peers. This could make Hibbett Inc more attractive for value investors when compared to the industry median at 2.13.

You can read more about Hibbett Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Signet Jewelers Ltd’s Value Grade

Value Grade:

Signet Jewelers Ltd is a Bermuda-based holding company. The Company is a retailer of diamond jewelry. Its segments include North America, International and Other. The North America segment operates across the United States and Canada. Its United States stores operate nationally in malls and off-mall locations, as well as online, principally as Kay (Kay Jewelers and Kay Outlet), Zales (Zales Jewelers and Zales Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), Diamonds Direct, Banter by Piercing Pagoda, Rocksbox, and digital banners, James Allen and Blue Nile. Its Canadian stores operate as Peoples Jewellers. The International segment operates stores in the United Kingdom, Republic of Ireland and Channel Islands, as well as online. Its stores operate in shopping malls and off-mall locations principally under the H. Samuel and Ernest Jones banners. Other segment consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Signet Jewelers Ltd has a Value Score of 84, which is considered to be undervalued.

Signet Jewelers Ltd’s price-earnings ratio is 7.2 compared to the industry median at 14.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Signet Jewelers Ltd more attractive for value investors.

Signet Jewelers Ltd’s price-to-book ratio is lower than its peers. This could make Signet Jewelers Ltd fairly attractive for value investors when compared to the industry median at 2.13.

You can read more about Signet Jewelers Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Retailers - Apparel & Accessories Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Retailers - Apparel & Accessories stocks as well as other industrys.

Choosing Which of the 3 Best Retailers - Apparel & Accessories Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Designer Brands Inc stock has a Value Grade of A.
• Hibbett Inc stock has a Value Grade of B.
• Signet Jewelers Ltd stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Retailers - Apparel & Accessories industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Retailers - Apparel & Accessories Stocks

Want to learn more about Retailers - Apparel & Accessories stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Retailers - Apparel & Accessories Stocks for Thursday, May 30
• 3 Undervalued Retailers - Apparel & Accessories Stocks for Wednesday, May 29
• What You Need to Know About Abercrombie & Fitch Co's Q1 Earnings
• What You Need to Know About American Eagle Outfitters Inc's Q4 Earnings

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