Investors interested in stocks from the Retail - Discount Stores sector have probably already heard of Target (TGT) and Ross Stores (ROST). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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 and Ross Stores are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, 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 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 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 13.58, while ROST has a forward P/E of 20.61. We also note that TGT has a PEG ratio of 1.92. 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 1.98.
Another notable valuation metric for TGT is its P/B ratio of 3.73. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ROST has a P/B of 10.45.
These metrics, and several others, help TGT earn a Value grade of B, while ROST has been given a Value grade of C.
TGT has seen stronger estimate revision activity and sports more attractive valuation metrics than ROST, so it seems like value investors will conclude that TGT is the superior option right now.
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Target Corporation (TGT) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
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