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Should Value Investors Buy Target (TGT) Stock?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Target (TGT - Free Report) is a stock many investors are watching right now. TGT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 17.07. This compares to its industry's average Forward P/E of 23.43. TGT's Forward P/E has been as high as 17.67 and as low as 10.95, with a median of 13.71, all within the past year.

Investors will also notice that TGT has a PEG ratio of 2.41. 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. TGT's industry has an average PEG of 2.46 right now. TGT's PEG has been as high as 2.50 and as low as 1.83, with a median of 2.11, all within the past year.

Another notable valuation metric for TGT is its P/B ratio of 4.79. 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. This stock's P/B looks solid versus its industry's average P/B of 11.25. Over the past 12 months, TGT's P/B has been as high as 4.91 and as low as 2.88, with a median of 3.71.

Finally, our model also underscores that TGT has a P/CF ratio of 10.11. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. TGT's P/CF compares to its industry's average P/CF of 22.95. Over the past 52 weeks, TGT's P/CF has been as high as 10.37 and as low as 5.68, with a median of 7.70.

These are just a handful of the figures considered in Target's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that TGT is an impressive value stock right now.


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