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ODP vs. TSCO: Which Stock Is the Better Value Option?

Zacks Equity Research
·2-min read

Investors looking for stocks in the Retail - Miscellaneous sector might want to consider either Office Depot (ODP) or Tractor Supply (TSCO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.

Office Depot has a Zacks Rank of #2 (Buy), while Tractor Supply 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 ODP 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.

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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.

ODP currently has a forward P/E ratio of 5.20, while TSCO has a forward P/E of 22.21. We also note that ODP has a PEG ratio of 0.42. 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. TSCO currently has a PEG ratio of 1.93.

Another notable valuation metric for ODP is its P/B ratio of 0.53. 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 9.

These metrics, and several others, help ODP earn a Value grade of A, while TSCO has been given a Value grade of C.

ODP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ODP is likely the superior value option right now.


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Office Depot Inc (ODP) : Free Stock Analysis Report
 
Tractor Supply Company (TSCO) : Free Stock Analysis Report
 
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Zacks Investment Research