Investors interested in stocks from the Retail - Discount Stores sector have probably already heard of Dollar General (DG) and TJX (TJX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Dollar General has a Zacks Rank of #2 (Buy), while TJX has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DG is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DG currently has a forward P/E ratio of 22.08, while TJX has a forward P/E of 25.67. We also note that DG has a PEG ratio of 1.99. 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. TJX currently has a PEG ratio of 2.45.
Another notable valuation metric for DG is its P/B ratio of 9.32. 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. For comparison, TJX has a P/B of 16.33.
These metrics, and several others, help DG earn a Value grade of B, while TJX has been given a Value grade of C.
DG sticks out from TJX in both our Zacks Rank and Style Scores models, so value investors will likely feel that DG is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report