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ODP or FIVE: Which Is the Better Value Stock Right Now?

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Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of ODP Corp. (ODP - Free Report) and Five Below (FIVE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Currently, ODP Corp. has a Zacks Rank of #1 (Strong Buy), while Five Below has a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ODP has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

ODP currently has a forward P/E ratio of 5.61, while FIVE has a forward P/E of 84.42. We also note that ODP has a PEG ratio of 0.82. 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. FIVE currently has a PEG ratio of 4.02.

Another notable valuation metric for ODP is its P/B ratio of 0.94. 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, FIVE has a P/B of 12.85.

These are just a few of the metrics contributing to ODP's Value grade of A and FIVE's Value grade of F.

ODP stands above FIVE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ODP is the superior value option right now.


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