Investors interested in Retail - Discount Stores stocks are likely familiar with 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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 #1 (Strong Buy), while Ross Stores has a Zacks Rank of #2 (Buy) 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 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.
DG currently has a forward P/E ratio of 22.07, while ROST has a forward P/E of 29.67. We also note that DG has a PEG ratio of 2.60. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ROST currently has a PEG ratio of 4.21.
Another notable valuation metric for DG is its P/B ratio of 3.84. 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 10.52.
These metrics, and several others, help DG earn a Value grade of B, while ROST has been given a Value grade of D.
DG has seen stronger estimate revision activity and sports more attractive valuation metrics than ROST, so it seems like value investors will conclude that DG is the superior option right now.
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Ross Stores, Inc. (ROST) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
