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DG vs. ROST: Which Stock Is the Better Value Option?

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Investors with an interest in Retail - Discount Stores stocks have likely encountered both Dollar General (DG) and Ross Stores (ROST). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both Dollar General and Ross Stores are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

DG currently has a forward P/E ratio of 22.58, while ROST has a forward P/E of 28.11. We also note that DG has a PEG ratio of 2. 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. ROST currently has a PEG ratio of 2.81.

Another notable valuation metric for DG is its P/B ratio of 8.70. 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, ROST has a P/B of 11.89.

These are just a few of the metrics contributing to DG's Value grade of B and ROST's Value grade of D.

Both DG and ROST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DG is the superior value option right now.


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Dollar General Corporation (DG) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
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Zacks Investment Research