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Are Investors Undervaluing Target (TGT) Right Now?

Intrexon (XON) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Target (TGT) is a stock many investors are watching right now. TGT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 14.43 right now. For comparison, its industry sports an average P/E of 19.68. Over the past year, TGT's Forward P/E has been as high as 16.96 and as low as 12.34, with a median of 14.49.

Another notable valuation metric for TGT is its P/B ratio of 3.81. 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. This stock's P/B looks attractive against its industry's average P/B of 9.42. Over the past 12 months, TGT's P/B has been as high as 4.21 and as low as 2.64, with a median of 3.62.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. TGT has a P/S ratio of 0.57. This compares to its industry's average P/S of 0.68.

Finally, our model also underscores that TGT has a P/CF ratio of 7.69. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. TGT's P/CF compares to its industry's average P/CF of 18.76. Within the past 12 months, TGT's P/CF has been as high as 8.54 and as low as 5.89, with a median of 7.59.

These are only a few of the key metrics included in Target's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, TGT looks like an impressive value stock at the moment.


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