When a company's management talks about the stock being too cheap, be suspicious. And when the company behind that stock has never produced especially good returns on invested capital, as is the case with Perry Ellis (NASDAQ:PERY), be very suspicious.

I'll get to the relative valuation in a moment, but let's first examine the quarter that was for the company behind its namesake clothing brand, as well as others like Cubavera and Original Penguin. I guess I could be generous and say it wasn't a terrible quarter, but it certainly wasn't all that strong either.

Sales were down 5%, and the company blamed store closings tied to the Federated (NYSE:FD) purchase of May as well as exiting the private-label business at Sears (NASDAQ:SHLD). And though gross margins did in fact improve from the year-ago level, operating and adjusted net earnings were both down.

I also thought management made a few curious comments on its conference call. For starters, while its claim that Perry Ellis is a leading brand for Federated may be true, I think Phillips-Van Heusen (NYSE:PVH) might argue that point.

More curious, though, was the claim that the stock is somehow undervalued because it has the lowest price-to-book value ratio in the sector. Well, I'd say management's half-right -- Perry Ellis does indeed have the lowest such ratio amongst companies I'd consider comparable. Where I differ with management, though, is that I believe the company deserves that valuation. And by the way, who the heck values a clothing brand on a price-to-book basis anyways?

Look at this table of Perry Ellis and some of its competitors.

Company

ROIC

ROA

Pre-Tax Margin

EV/
EBITDA

Price/
Book

Perry Ellis

4.7%

4%

4.3%

7.15

1.03

Phillips-Van Heusen

13.4%

7.8%

9.2%

6.17

2.35

Oxford Industries (NYSE:OXM)

9%

6.6%

6.5%

7.10

2.05

VF
 (NYSE:VF)

14.8%

10%

12%

8.02

2.42

Warnaco (NASDAQ:WRNC)

3.7%

2.4%

3.9%

7.79

1.27


As you can see, Perry Ellis competes only with Warnaco (still something of a post-bankruptcy recovery story) in terms of the worst returns on capital (return on invested capital and return on assets) and margins. What's more, when you look at the more reasonable valuation metric of enterprise value to EBITDA, that supposedly significant discount to the competition evaporates.

Turning back to company-specific cash flow analysis, if I had to own stocks in this category, I'd far prefer to own Oxford, VF, or Phillips-Van Heusen (and probably in that order). Not only do I wonder about the freshness of Perry Ellis' brands, but the company simply hasn't shown it can generate strong enough performance to make it a real candidate for long-term consideration.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).