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

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Investors with an interest in Retail - Discount Stores stocks have likely encountered both Dollar General (DG - Free Report) and Ross Stores (ROST - 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.

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.

Currently, Dollar General has a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DG likely has seen a stronger improvement to its earnings outlook than ROST has recently. 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.

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 21.72, while ROST has a forward P/E of 28.83. We also note that DG has a PEG ratio of 1.92. 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 2.88.

Another notable valuation metric for DG is its P/B ratio of 8.34. 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 12.20.

Based on these metrics and many more, DG holds a Value grade of B, while ROST has a 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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