Should Value Investors Buy Target (TGT) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is Target (TGT). TGT is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 12.71. This compares to its industry's average Forward P/E of 20.73. Over the past year, TGT's Forward P/E has been as high as 16.16 and as low as 10.95, with a median of 13.97.
Investors should also note that TGT holds a PEG ratio of 2.02. 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. TGT's PEG compares to its industry's average PEG of 2.08. Over the last 12 months, TGT's PEG has been as high as 3.17 and as low as 1.83, with a median of 2.25.
Another notable valuation metric for TGT is its P/B ratio of 3.43. 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. This stock's P/B looks attractive against its industry's average P/B of 9.91. TGT's P/B has been as high as 4.21 and as low as 2.88, with a median of 3.66, over the past year.
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 0.51. This compares to its industry's average P/S of 0.65.
Finally, our model also underscores that TGT has a P/CF ratio of 7.28. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 19.58. Within the past 12 months, TGT's P/CF has been as high as 8.53 and as low as 5.68, with a median of 7.60.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Target is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TGT feels like a great value stock at the moment.
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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.