DG vs. TJX: Which Stock Is the Better Value Option?
Investors interested in Retail - Discount Stores stocks are likely familiar with Dollar General (DG) and TJX (TJX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Dollar General is sporting a Zacks Rank of #1 (Strong Buy), while TJX has a Zacks Rank of #4 (Sell). 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 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.
DG currently has a forward P/E ratio of 21.58, while TJX has a forward P/E of 88.30. We also note that DG has a PEG ratio of 1.73. 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. TJX currently has a PEG ratio of 8.41.
Another notable valuation metric for DG is its P/B ratio of 6.69. 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, TJX has a P/B of 13.49.
Based on these metrics and many more, DG holds a Value grade of B, while TJX has a Value grade of D.
DG has seen stronger estimate revision activity and sports more attractive valuation metrics than TJX, so it seems like value investors will conclude that DG is the superior option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.