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ROST vs. COST: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Retail - Discount Stores sector might want to consider either Ross Stores (ROST - Free Report) or Costco (COST - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Ross Stores has a Zacks Rank of #2 (Buy), while Costco 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 ROST has an improving earnings outlook. However, value investors will care about much more than just this.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

ROST currently has a forward P/E ratio of 22.85, while COST has a forward P/E of 33.90. We also note that ROST has a PEG ratio of 2.18. 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. COST currently has a PEG ratio of 3.31.

Another notable valuation metric for ROST is its P/B ratio of 7.68. 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, COST has a P/B of 10.50.

These metrics, and several others, help ROST earn a Value grade of B, while COST has been given a Value grade of C.

ROST sticks out from COST in both our Zacks Rank and Style Scores models, so value investors will likely feel that ROST is the better option right now.


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Costco Wholesale Corporation (COST) - free report >>

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