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DG vs. ROST: Which Stock Should Value Investors Buy Now?

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Investors interested in Retail - Discount Stores stocks are likely familiar with Dollar General (DG - Free Report) and Ross Stores (ROST - 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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Dollar General has a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DG is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

DG currently has a forward P/E ratio of 21.14, while ROST has a forward P/E of 27.86. We also note that DG has a PEG ratio of 1.87. 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 2.79.

Another notable valuation metric for DG is its P/B ratio of 8.12. 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 11.77.

These are just a few of the metrics contributing to DG's Value grade of B and ROST's Value grade of C.

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


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