Investors looking for stocks in the Retail – Miscellaneous sector might want to consider either Petco Health & Wellness (WOOF) or Tractor Supply $TSCO (TSCO). But which of these two companies is the best option for those looking for undervalued stocks? Let’s 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Petco Health & Wellness and Tractor Supply are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This means that WOOF’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
WOOF currently has a forward P/E ratio of 14.10, while TSCO has a forward P/E of 20.02. We also note that WOOF has a PEG ratio of 1.28. 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. TSCO currently has a PEG ratio of 2.00.
Another notable valuation metric for WOOF is its P/B ratio of 0.74. 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, TSCO has a P/B of 8.9.
These metrics, and several others, help WOOF earn a Value grade of A, while TSCO has been given a Value grade of C.
WOOF stands above TSCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WOOF is the superior value option right now.
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