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TGT vs. ROST: Which Stock Should Value Investors Buy Now?

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Investors interested in Retail - Discount Stores stocks are likely familiar with Target (TGT - Free Report) and Ross Stores (ROST - Free Report) . 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Target and Ross Stores are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TGT has an improving earnings outlook. But this is just one piece of the puzzle 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.

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 15.72, while ROST has a forward P/E of 19.73. We also note that TGT has a PEG ratio of 0.95. 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. ROST currently has a PEG ratio of 1.97.

Another notable valuation metric for TGT is its P/B ratio of 8.54. 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, ROST has a P/B of 8.68.

These are just a few of the metrics contributing to TGT's Value grade of A and ROST's Value grade of C.

TGT stands above ROST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TGT is the superior value option right now.


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