Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 stocks made the list for top value stocks in the Specialty Retail 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 Specialty Retail 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.

Click the button below to learn more about A+ Investor and subscribe today.

7 Undervalued Specialty Retail Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Specialty Retail industry for Wednesday, October 16, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Specialty Retail 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.

Build-A-Bear Workshop, Inc.’s Value Grade

Value Grade:

Build-A-Bear Workshop, Inc. operates as a multi-channel retailer of plush animals and related products in the United States, Canada, the United Kingdom, Ireland, and internationally. The company operates through three segments: Direct-to-Consumer, Commercial, and International Franchising. Its merchandise comprises various styles of plush products to be stuffed, pre-stuffed plush products, and sounds and scents that can be added to the stuffed animals, as well as range of clothing, shoes and accessories, and other toy and novelty items, including family sleepwear. The company operates its stores under the Build-A-Bear Workshop brand name; and sells its products through its e-commerce sites and third-party marketplace sites. Build-A-Bear Workshop, Inc. was founded in 1997 and is headquartered in Saint Louis, Missouri.

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.

Build-A-Bear Workshop, Inc. has a Value Score of 73, which is considered to be undervalued.

When you look at Build-A-Bear Workshop, Inc.’s price-to-sales ratio at 1.07 compared to the industry median at 0.40, this company has a higher price relative to revenue compared to its peers. This could make Build-A-Bear Workshop, Inc.’s stock less attractive for value investors.

Build-A-Bear Workshop, Inc.’s price-earnings ratio is 10.30 compared to the industry median at 18.10. This means it has a lower share price relative to earnings compared to its peers. This could make Build-A-Bear Workshop, Inc. more attractive for value investors.

Now, let’s assess Build-A-Bear Workshop, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 5.8, when compared to the industry median of 13.6, the company may be considered undervalued 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. Build-A-Bear Workshop, Inc.’s shareholder yield is higher than its industry median ratio of 0.00%. 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. Build-A-Bear Workshop, Inc.’s price-to-book ratio is higher than its industry median ratio of 1.64. This could make Build-A-Bear Workshop, Inc. less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Build-A-Bear Workshop, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Build-A-Bear Workshop, Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 21.00. This could make Build-A-Bear Workshop, Inc. less attractive because the higher P/FCF ratio indicates that Build-A-Bear Workshop, 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.

Brilliant Earth Group, Inc.’s Value Grade

Value Grade:

Brilliant Earth Group, Inc. designs, procures, and sells diamonds, gemstones, and jewelry in the United States and internationally. The company’s product assortment and merchandise include a collection of diamond engagement rings, wedding and anniversary rings, gemstone rings, and fine jewelry. It sells directly to consumers through its omnichannel sales platform, including e-commerce and showrooms. Brilliant Earth Group, Inc. was founded in 2005 and is headquartered in San Francisco, California.

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.

Brilliant Earth Group, Inc. has a Value Score of 80, which is considered to be undervalued.

Brilliant Earth Group, Inc.’s price-earnings ratio is 35.6 compared to the industry median at 18.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Brilliant Earth Group, Inc. less attractive for value investors.

Brilliant Earth Group, Inc.’s price-to-book ratio is higher than its peers. This could make Brilliant Earth Group, Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about Brilliant Earth Group, 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.

Cango Inc.’s Value Grade

Value Grade:

Cango Inc. operates an automotive transaction service platform that connects dealers, original equipment manufacturers, financial institutions, car buyers, insurance brokers, and companies in the People’s Republic of China. The company offers automobile trading solutions comprising car sourcing, transaction facilitation, logistics, and warehousing support for dealers through Cango Haoche app that offers new car transaction services, and Cango U-Car app that offers used-car transaction services. It also provides automotive financing facilitation services that include facilitating financing transactions from financial institutions to car buyers, which comprises credit origination, credit assessment, credit servicing, and delinquent asset management services; facilitating financing transactions of car purchases for car buyers; and after-market services to car buyers, which includes facilitating the sale of insurance policies from insurance brokers or companies. The company was founded in 2010 and is headquartered in Shanghai, the People’s Republic of China.

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.

Cango Inc. has a Value Score of 90, which is considered to be undervalued.

Cango Inc.’s price-earnings ratio is 56.7 compared to the industry median at 18.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Cango Inc. less attractive for value investors.

Cango Inc.’s price-to-book ratio is higher than its peers. This could make Cango Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about Cango 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.

Citi Trends, Inc.’s Value Grade

Value Grade:

Citi Trends, Inc. operates as a value retailer of fashion apparel, accessories, and home goods. The company offers apparel, such as fashion sportswear and footwear for men and ladies, as well as apparel for kids, including newborns, infants, toddlers, boys, and girls; sleepwear, lingerie, and scrubs for ladies; and kids uniforms and accessories. It also provides accessories and beauty products that include handbags, luggage, hats, belts, sunglasses, jewelry, and watches, as well as offers outerwear for men and women. In addition, the company offers home and lifestyle products comprising home products for the bedroom, bathroom, kitchen, and decorative accessories; and food, tech, team sports, health and products, as well as seasonal items, books, and toys. Citi Trends, Inc. provides its products primarily to African American and multicultural families in the United States. The company was formerly known as Allied Fashion, Inc. and changed its name to Citi Trends, Inc. in 2001. Citi Trends, Inc. was founded in 1946 and is headquartered in Savannah, Georgia.

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.

Citi Trends, Inc. has a Value Score of 74, which is considered to be undervalued.

Citi Trends, Inc.’s price-to-book ratio is higher than its peers. This could make Citi Trends, Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about Citi Trends, 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.

Lulu's Fashion Lounge Holdings, Inc.’s Value Grade

Value Grade:

Lulu's Fashion Lounge Holdings, Inc. operates as an online retailer of women’s apparel, footwear, and accessories. The company offers formals, casuals, dresses, tops, bottoms, wedding dresses, rompers and jumpsits, intimates and sleepwear, swimwear, shoes, and accessories under the Lulus brand. It sells its products through owned media, which primarily consists of its website, mobile app, social media, email, and SMS; and earned and paid media, as well as social media platforms. The company also operates bridal boutique stores that offers bridal gowns, bridesmaids dresses, bridal accessories, shoes, and others. The company primarily serves Millennial and Gen Z women. Lulu's Fashion Lounge Holdings, Inc. was founded in 1996 and is headquartered in Chico, California.

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.

Lulu's Fashion Lounge Holdings, Inc. has a Value Score of 84, which is considered to be undervalued.

Lulu's Fashion Lounge Holdings, Inc.’s price-to-book ratio is higher than its peers. This could make Lulu's Fashion Lounge Holdings, Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about Lulu's Fashion Lounge Holdings, 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.

OneWater Marine Inc.’s Value Grade

Value Grade:

OneWater Marine Inc. operates as a recreational boat retailer in the United States. The company offers new and pre-owned recreational boats and yachts, as well as related marine products, such as parts and accessories. It provides boat repair and maintenance services. In addition, the company arranges boat financing and insurance; and other ancillary services, including indoor and outdoor storage, and marina services. Further, it provides rental of boats and personal watercraft services. OneWater Marine Inc. was founded in 2014 and is headquartered in Buford, Georgia.

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.

OneWater Marine Inc. has a Value Score of 71, which is considered to be undervalued.

OneWater Marine Inc.’s price-to-book ratio is higher than its peers. This could make OneWater Marine Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about OneWater Marine 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.

Penske Automotive Group, Inc.’s Value Grade

Value Grade:

Penske Automotive Group, Inc., a diversified transportation services company, operates automotive and commercial truck dealerships worldwide. The company operates through four segments: Retail Automotive, Retail Commercial Truck, Other, and Non-Automotive Investments. It operates dealerships under franchise agreements with various automotive manufacturers and distributors. The company is also involved in the sale of new and used motor vehicles, maintenance and repair services, sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, replacement and aftermarket automotive products, collision repair services, and wholesale of parts. In addition, it operates a heavy and medium duty truck dealership, which offers Freightliner and Western Star branded trucks, as well as offers a range of used trucks. Further, it imports and distributes Western Star heavy-duty trucks, MAN heavy and medium duty trucks and buses, and Dennis Eagle refuse collection vehicles with associated parts. Additionally, the company distributes diesel and gas engines, and power systems. Penske Automotive Group, Inc. was incorporated in 1990 and is headquartered in Bloomfield Hills, Michigan. Penske Automotive Group, Inc. is a subsidiary of Penske Corporation, Inc.

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.

Penske Automotive Group, Inc. has a Value Score of 75, which is considered to be undervalued.

Penske Automotive Group, Inc.’s price-earnings ratio is 11.4 compared to the industry median at 18.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Penske Automotive Group, Inc. more attractive for value investors.

Penske Automotive Group, Inc.’s price-to-book ratio is lower than its peers. This could make Penske Automotive Group, Inc. more attractive for value investors when compared to the industry median at 1.64.

You can read more about Penske Automotive Group, 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.

Other Specialty Retail 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 Specialty Retail stocks as well as other industrys.

Choosing Which of the 7 Best Specialty Retail 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.

• Build-A-Bear Workshop, Inc. stock has a Value Grade of B.
• Brilliant Earth Group, Inc. stock has a Value Grade of B.
• Cango Inc. stock has a Value Grade of A.
• Citi Trends, Inc. stock has a Value Grade of B.
• Lulu's Fashion Lounge Holdings, Inc. stock has a Value Grade of A.
• OneWater Marine Inc. stock has a Value Grade of B.
• Penske Automotive Group, Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 undervalued stocks in the Specialty Retail 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 Specialty Retail Stocks

Want to learn more about Specialty Retail 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.

• 7 Undervalued Specialty Retail Stocks for Wednesday, October 16
• 6 Undervalued Specialty Retail Stocks for Tuesday, October 15
• 6 Undervalued Specialty Retail Stocks for Monday, October 14
• 6 Undervalued Specialty Retail Stocks for Friday, October 11

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.