EWCZ or ELF: Which Is the Better Value Stock Right Now?

Investors with an interest in Cosmetics stocks have likely encountered both European Wax Center, Inc. (EWCZ) and e.l.f. Beauty (ELF). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, European Wax Center, Inc. is sporting a Zacks Rank of #2 (Buy), while e.l.f. Beauty has a Zacks Rank of #3 (Hold). This means that EWCZ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

EWCZ currently has a forward P/E ratio of 8.78, while ELF has a forward P/E of 26.58. We also note that EWCZ has a PEG ratio of 0.48. 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. ELF currently has a PEG ratio of 4.17.

Another notable valuation metric for EWCZ is its P/B ratio of 2.99. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ELF has a P/B of 4.2.

These are just a few of the metrics contributing to EWCZ's Value grade of A and ELF's Value grade of F.

EWCZ sticks out from ELF in both our Zacks Rank and Style Scores models, so value investors will likely feel that EWCZ is the better option right now.

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European Wax Center, Inc. (EWCZ): Free Stock Analysis Report

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

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