DLTR vs. ROST: Which Stock Should Value Investors Buy Now?
Investors with an interest in Retail - Discount Stores stocks have likely encountered both Dollar Tree (DLTR) and Ross Stores (ROST). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Dollar Tree and Ross Stores are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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 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.
DLTR currently has a forward P/E ratio of 16.90, while ROST has a forward P/E of 21.04. We also note that DLTR has a PEG ratio of 1.23. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ROST currently has a PEG ratio of 2.10.
Another notable valuation metric for DLTR is its P/B ratio of 2.92. 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 10.94.
These are just a few of the metrics contributing to DLTR's Value grade of B and ROST's Value grade of C.
Both DLTR and ROST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DLTR is the superior value option right now.
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