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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 is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DG has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
DG currently has a forward P/E ratio of 13.16, while TJX has a forward P/E of 28.87. We also note that DG has a PEG ratio of 2.25. 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 3.03.
Another notable valuation metric for DG is its P/B ratio of 2.34. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TJX has a P/B of 17.34.
Based on these metrics and many more, DG holds a Value grade of A, while TJX has a Value grade of C.
DG sticks out from TJX in both our Zacks Rank and Style Scores models, so value investors will likely feel that DG is the better option right now.
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Dollar General Corporation (DG) : Free Stock Analysis Report
The TJX Companies, Inc. (TJX) : Free Stock Analysis Report