Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of Dick's Sporting Goods (DKS - Free Report) and Tractor Supply (TSCO - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Dick's Sporting Goods has a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DKS likely has seen a stronger improvement to its earnings outlook than TSCO has recently. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
DKS currently has a forward P/E ratio of 6.44, while TSCO has a forward P/E of 16.57. We also note that DKS has a PEG ratio of 0.89. 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 1.43.
Another notable valuation metric for DKS is its P/B ratio of 1.09. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TSCO has a P/B of 6.22.
These metrics, and several others, help DKS earn a Value grade of A, while TSCO has been given a Value grade of C.
DKS stands above TSCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DKS is the superior value option right now.