TGT or COST: Which Is the Better Value Stock Right Now?
TGT vs. COST: Which Stock Is the Better Value Option?
Investors interested in stocks from the Retail - Discount Stores sector have probably already heard of Target (TGT) and Costco (COST). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Target and Costco are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 18.59, while COST has a forward P/E of 44.41. We also note that TGT has a PEG ratio of 1.29. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. COST currently has a PEG ratio of 5.14.
Another notable valuation metric for TGT is its P/B ratio of 8.65. 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 13.19.
Based on these metrics and many more, TGT holds a Value grade of B, while COST has a Value grade of C.
Both TGT and COST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TGT is the superior value option right now.
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Target Corporation (TGT): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report
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