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

Zacks Equity Research

Investors looking for stocks in the Retail - Discount Stores sector might want to consider either Dollar General (DG) or Ross Stores (ROST). 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Both Dollar General and Ross Stores have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

DG currently has a forward P/E ratio of 23.39, while ROST has a forward P/E of 25.40. We also note that DG has a PEG ratio of 2.29. 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 2.42.

Another notable valuation metric for DG is its P/B ratio of 5.89. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ROST has a P/B of 12.81.

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

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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