Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Regis (RGS) and Tractor Supply (TSCO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Regis is sporting a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #4 (Sell). This means that RGS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
RGS currently has a forward P/E ratio of 6.11, while TSCO has a forward P/E of 19.05. We also note that RGS has a PEG ratio of 0.81. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TSCO currently has a PEG ratio of 1.65.
Another notable valuation metric for RGS is its P/B ratio of 1.72. 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, TSCO has a P/B of 7.22.
These metrics, and several others, help RGS earn a Value grade of B, while TSCO has been given a Value grade of C.
RGS has seen stronger estimate revision activity and sports more attractive valuation metrics than TSCO, so it seems like value investors will conclude that RGS is the superior option right now.