Should Value Investors Buy Dollar Tree (DLTR) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Dollar Tree (DLTR) is a stock many investors are watching right now. DLTR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 20.14, which compares to its industry's average of 24.56. Over the past year, DLTR's Forward P/E has been as high as 20.89 and as low as 12.93, with a median of 17.82.

We also note that DLTR holds a PEG ratio of 1.87. 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. DLTR's industry currently sports an average PEG of 2.50. Within the past year, DLTR's PEG has been as high as 2.61 and as low as 1.22, with a median of 1.85.

Finally, we should also recognize that DLTR has a P/CF ratio of 13.01. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 23.27. DLTR's P/CF has been as high as 15.84 and as low as 8.69, with a median of 12.53, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Dollar Tree is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DLTR feels like a great value stock at the moment.

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
 
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research