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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.
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.
Right now, both Target and Ross Stores are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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 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.
TGT currently has a forward P/E ratio of 15.82, while ROST has a forward P/E of 24.12. We also note that TGT has a PEG ratio of 2.23. 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 2.46.
Another notable valuation metric for TGT is its P/B ratio of 4.34. 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, ROST has a P/B of 9.34.
These are just a few of the metrics contributing to TGT's Value grade of A and ROST's Value grade of C.
Both TGT and ROST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TGT is the superior value option right now.
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Target Corporation (TGT) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report