Investors looking for stocks in the Retail - Discount Stores sector might want to consider either Target (TGT) or TJX (TJX). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Target has a Zacks Rank of #1 (Strong Buy), while TJX has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TGT is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
TGT currently has a forward P/E ratio of 20.09, while TJX has a forward P/E of 156.34. We also note that TGT has a PEG ratio of 2.37. 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. TJX currently has a PEG ratio of 14.89.
Another notable valuation metric for TGT is its P/B ratio of 6.63. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TJX has a P/B of 14.75.
These metrics, and several others, help TGT earn a Value grade of B, while TJX has been given a Value grade of D.
TGT sticks out from TJX in both our Zacks Rank and Style Scores models, so value investors will likely feel that TGT is the better option right now.
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