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BIG or COST: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 mins read

Investors with an interest in Retail - Discount Stores stocks have likely encountered both Big Lots (BIG) and Costco (COST). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Big Lots and Costco are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BIG has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

BIG currently has a forward P/E ratio of 7.56, while COST has a forward P/E of 39.72. We also note that BIG has a PEG ratio of 1.07. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. COST currently has a PEG ratio of 4.73.

Another notable valuation metric for BIG is its P/B ratio of 2.23. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, COST has a P/B of 8.73.

Based on these metrics and many more, BIG holds a Value grade of A, while COST has a Value grade of C.

BIG stands above COST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BIG is the superior value option right now.


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Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
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Zacks Investment Research