Investors with an interest in Retail – Discount Stores stocks have likely encountered both Dollar General (DG) 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Dollar General has a Zacks Rank of #2 (Buy), while TJX has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DG likely has seen a stronger improvement to its earnings outlook than TJX has recently. But this is just one piece of the puzzle for value investors.
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 17.23, while TJX has a forward P/E of 25.16. We also note that DG has a PEG ratio of 1.81. 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. TJX currently has a PEG ratio of 2.37.
Another notable valuation metric for DG is its P/B ratio of 3.11. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. By comparison, TJX has a P/B of 13.56.
These metrics, and several others, help DG earn a Value grade of A, while TJX has been given a Value grade of D.
DG has seen stronger estimate revision activity and sports more attractive valuation metrics than TJX, so it seems like value investors will conclude that DG is the superior option right now.
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Dollar General Corporation (DG) : Free Stock Analysis Report
The TJX Companies, Inc. (TJX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
