Back to top

Image: Bigstock

KAR or TSCO: Which Is the Better Value Stock Right Now?

Read MoreHide Full Article

Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of KAR Auction Services (KAR - Free Report) and Tractor Supply (TSCO - Free Report) . 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.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Both KAR Auction Services and Tractor Supply have a Zacks Rank of # 2 (Buy) right now. 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 piece of the puzzle for value investors.

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.

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.

KAR currently has a forward P/E ratio of 18.53, while TSCO has a forward P/E of 21.37. We also note that KAR has a PEG ratio of 1.66. 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. TSCO currently has a PEG ratio of 1.67.

Another notable valuation metric for KAR is its P/B ratio of 4.95. 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, TSCO has a P/B of 7.40.

These metrics, and several others, help KAR earn a Value grade of B, while TSCO has been given a Value grade of D.

Both KAR and TSCO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KAR is the superior value option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Tractor Supply Company (TSCO) - free report >>

OPENLANE, Inc. (KAR) - free report >>

Published in