3 Undervalued Retailers - Apparel & Accessories Stocks for Friday, August 02 (2024)

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.

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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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 Friday, August 02, 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.

The Cato Corporation is a fashion specialty retailer. The Company operates through two segments: the operation of a fashion specialty stores segment (Retail Segment) and a credit card segment (Credit Segment). The Company's merchandise lines include dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry, handbags, men's wear and lines for kids and infants. The apparel specialty stores operate under the names Cato, Cato Fashions, Cato Plus, Its Fashion, Its Fashion Metro and Versona, including e-commerce websites. The Versona brand stores and e-commerce Website offer quality fashion apparel items, jewelry and accessories at values every day. The Company offers its own credit cards to its customers and all credit authorizations, payment processing and collection efforts are performed by a wholly owned subsidiary of the Company. It operates approximately 1,178 fashion specialty stores in 31 states, principally in the southeastern United States.

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.

Cato Corp has a Value Score of 100, which is considered to be undervalued.

When you look at Cato Corp’s price-to-sales ratio at 0.15 compared to the industry median at 0.45, this company has a lower price relative to revenue compared to its peers. This could make Cato Corp’s stock more attractive for value investors.

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. Cato Corp’s shareholder yield is higher than its industry median ratio of 1.39%. 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. Cato Corp’s price-to-book ratio is lower than its industry median ratio of 2.08. This could make Cato Corp more attractive to investors looking for a new addition to their portfolio.

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 92, which is considered to be undervalued.

Signet Jewelers Ltd’s price-earnings ratio is 6.8 compared to the industry median at 13.7. 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 higher than its peers. This could make Signet Jewelers Ltd less attractive for value investors when compared to the industry median at 2.08.

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.

Vince Holding Corp. is a global contemporary retailer that operates the Vince brand women's and men's ready to wear business. The Company’s segment includes Vince Wholesale and Vince Direct-to-consumer. The Vince Wholesale segment consists of its operations to distribute Vince brand products to department stores and specialty stores in the United States (U.S.) and select international markets. The Vince Direct-to-consumer segment consists of its operations to distribute Vince brand products directly to the consumer through its Vince-branded full-price specialty retail and outlet stores, e-commerce platform and its subscription business Vince Unfold. The Company operates approximately 48 full-price retail stores, 15 outlet stores, and its e-commerce site, vince.com and through its subscription service Vince Unfold, www.vinceunfold.com, as well as through premium wholesale channels globally.

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.

Vince Holding Corp has a Value Score of 86, which is considered to be undervalued.

Vince Holding Corp’s price-earnings ratio is 0.7 compared to the industry median at 13.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Vince Holding Corp more attractive for value investors.

Vince Holding Corp’s price-to-book ratio is higher than its peers. This could make Vince Holding Corp less attractive for value investors when compared to the industry median at 2.08.

You can read more about Vince Holding Corp’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.

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.

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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.

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