TGT or ROST: Which Is the Better Value Stock Right Now?
Investors with an interest in Retail - Discount Stores stocks have likely encountered both 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.
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.
Right now, Target is sporting a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold). 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 piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
TGT currently has a forward P/E ratio of 14.83, while ROST has a forward P/E of 22.40. We also note that TGT has a PEG ratio of 2.10. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ROST currently has a PEG ratio of 2.15.
Another notable valuation metric for TGT is its P/B ratio of 4.05. 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 11.27.
These are just a few of the metrics contributing to TGT's Value grade of B and ROST's Value grade of C.
TGT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TGT is likely the superior value option right now.
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