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

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Investors interested in Retail - Discount Stores stocks are likely familiar with Target (TGT - Free Report) and 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Target has a Zacks Rank of #2 (Buy), while Ross Stores has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TGT likely has seen a stronger improvement to its earnings outlook than ROST has recently. However, value investors will care about much more than just this.

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.

TGT currently has a forward P/E ratio of 12.27, while ROST has a forward P/E of 21.02. We also note that TGT has a PEG ratio of 1.95. 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. ROST currently has a PEG ratio of 2.02.

Another notable valuation metric for TGT is its P/B ratio of 3.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ROST has a P/B of 10.59.

These metrics, and several others, help TGT earn a Value grade of A, while ROST has been given a Value grade of C.

TGT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TGT is likely the superior value option right now.


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Target Corporation (TGT) - free report >>

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