Back to top

Is Target (TGT) Stock Undervalued Right Now?

Read MoreHide Full Article

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Target (TGT - Free Report) is a stock many investors are watching right now. TGT is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 13.56. This compares to its industry's average Forward P/E of 21.05. TGT's Forward P/E has been as high as 16.16 and as low as 10.95, with a median of 13.76, all within the past year.

Investors will also notice that TGT 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. TGT's PEG compares to its industry's average PEG of 2.11. TGT's PEG has been as high as 3.01 and as low as 1.83, with a median of 2.13, all within the past year.

Another valuation metric that we should highlight is TGT's P/B ratio of 3.83. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. TGT's current P/B looks attractive when compared to its industry's average P/B of 10.09. Within the past 52 weeks, TGT's P/B has been as high as 4.21 and as low as 2.88, with a median of 3.76.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. TGT has a P/S ratio of 0.56. This compares to its industry's average P/S of 0.69.

Finally, we should also recognize that TGT has a P/CF ratio of 7.84. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 20.15. TGT's P/CF has been as high as 8.53 and as low as 5.68, with a median of 7.80, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Target is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TGT feels like a great value stock at the moment.

In-Depth Zacks Research for the Tickers Above

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

Target Corporation (TGT) - free report >>

Published in