Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Dick's Sporting Goods (DKS) and Tractor Supply (TSCO). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Dick's Sporting Goods has a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DKS is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DKS currently has a forward P/E ratio of 16.41, while TSCO has a forward P/E of 26.28. We also note that DKS has a PEG ratio of 2.59. 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. TSCO currently has a PEG ratio of 2.91.
Another notable valuation metric for DKS is its P/B ratio of 6.45. 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, TSCO has a P/B of 13.40.
These metrics, and several others, help DKS earn a Value grade of B, while TSCO has been given a Value grade of C.
DKS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that DKS is likely the superior value option right now.
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Tractor Supply Company (TSCO) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
