Back to top

Image: Bigstock

BIG vs. ROST: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors looking for stocks in the Retail - Discount Stores sector might want to consider either Big Lots (BIG - Free Report) or Ross Stores (ROST - Free Report) . 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, Big Lots is sporting a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BIG likely has seen a stronger improvement to its earnings outlook than ROST has recently. But this is only part of the picture for value investors.

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.

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.

BIG currently has a forward P/E ratio of 6.84, while ROST has a forward P/E of 113.02. We also note that BIG has a PEG ratio of 0.97. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ROST currently has a PEG ratio of 11.30.

Another notable valuation metric for BIG is its P/B ratio of 1.38. 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. By comparison, ROST has a P/B of 11.60.

Based on these metrics and many more, BIG holds a Value grade of A, while ROST has a Value grade of C.

BIG sticks out from ROST in both our Zacks Rank and Style Scores models, so value investors will likely feel that BIG is the better option right now.


In-Depth Zacks Research for the Tickers Above


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


Big Lots, Inc. (BIG) - free report >>

Ross Stores, Inc. (ROST) - free report >>

Published in