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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Target is sporting a Zacks Rank of #2 (Buy), while TJX has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TGT likely has seen a stronger improvement to its earnings outlook than TJX has recently. But this is only part of the picture 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 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 15.76, while TJX has a forward P/E of 24.02. We also note that TGT has a PEG ratio of 1.11. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TJX currently has a PEG ratio of 2.13.
Another notable valuation metric for TGT is its P/B ratio of 4.85. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TJX has a P/B of 15.06.
These metrics, and several others, help TGT earn a Value grade of A, while TJX has been given a Value grade of C.
TGT sticks out from TJX in both our Zacks Rank and Style Scores models, so value investors will likely feel that TGT is the better option right now.
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