Investors with an interest in Retail - Discount Stores stocks have likely encountered both Target (TGT) and TJX (TJX). 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Target and TJX are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TGT currently has a forward P/E ratio of 14.77, while TJX has a forward P/E of 28.17. We also note that TGT has a PEG ratio of 2.43. 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 2.65.
Another notable valuation metric for TGT is its P/B ratio of 3.92. 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, TJX has a P/B of 15.18.
These metrics, and several others, help TGT earn a Value grade of A, while TJX has been given a Value grade of D.
Both TGT and TJX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TGT is the superior value option right now.
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Target Corporation (TGT): Free Stock Analysis Report
The TJX Companies, Inc. (TJX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).