BIG vs. COST: Which Stock Is the Better Value Option?
Investors with an interest in Retail - Discount Stores stocks have likely encountered both Big Lots (BIG) and Costco (COST). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Big Lots and Costco are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BIG likely has seen a stronger improvement to its earnings outlook than COST has recently. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BIG currently has a forward P/E ratio of 7.96, while COST has a forward P/E of 31.30. We also note that BIG has a PEG ratio of 1.05. 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 3.49.
Another notable valuation metric for BIG is its P/B ratio of 1.69. 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 7.71.
These are just a few of the metrics contributing to BIG's Value grade of A and COST's 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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