Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Petco Health & Wellness (WOOF) and Tractor Supply (TSCO). 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.
Petco Health & Wellness and Tractor Supply are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WOOF 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 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 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.
WOOF currently has a forward P/E ratio of 15.74, while TSCO has a forward P/E of 17.61. We also note that WOOF has a PEG ratio of 1.43. 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 2.17.
Another notable valuation metric for WOOF is its P/B ratio of 0.82. 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, TSCO has a P/B of 7.99.
These metrics, and several others, help WOOF earn a Value grade of B, while TSCO has been given a Value grade of C.
WOOF sticks out from TSCO in both our Zacks Rank and Style Scores models, so value investors will likely feel that WOOF is the better option right now.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them 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
Petco Health and Wellness Company, Inc. (WOOF): Free Stock Analysis Report
Tractor Supply Company (TSCO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).