Investors looking for stocks in the Retail - Miscellaneous sector might want to consider either Office Depot (ODP - Free Report) or Tractor Supply (TSCO - 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Office Depot has a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ODP is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
ODP currently has a forward P/E ratio of 5.90, while TSCO has a forward P/E of 20.34. We also note that ODP has a PEG ratio of 0.53. 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. TSCO currently has a PEG ratio of 1.84.
Another notable valuation metric for ODP is its P/B ratio of 0.58. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TSCO has a P/B of 7.61.
Based on these metrics and many more, ODP holds a Value grade of A, while TSCO has a Value grade of C.
ODP stands above TSCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ODP is the superior value option right now.