DG vs. ROST: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Retail - Discount Stores sector have probably already heard of Dollar General (DG) and 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.
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.
Dollar General has a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold) right now. This means that DG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 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 21.12, while ROST has a forward P/E of 27.65. We also note that DG has a PEG ratio of 1.72. 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 2.76.
Another notable valuation metric for DG is its P/B ratio of 7.81. 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 11.66.
These are just a few of the metrics contributing to DG's Value grade of B and ROST's Value grade of C.
DG sticks out from ROST in both our Zacks Rank and Style Scores models, so value investors will likely feel that DG is the better 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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