DKS Vs. TSCO: Which Stock Is The Better Value Option?
Zacks Investment Research | Mar 11, 2020 11:40PM ET
Investors looking for stocks in the Retail - Miscellaneous sector might want to consider either Dick's Sporting Goods (DKS) or Tractor Supply (TSCO). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Dick's Sporting Goods and Tractor Supply are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that DKS likely has seen a stronger improvement to its earnings outlook than TSCO has recently. However, value investors will care about much more than just this.
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.
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 7.93, while TSCO has a forward P/E of 16.46. We also note that DKS has a PEG ratio of 1.35. 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 1.42.
Another notable valuation metric for DKS is its P/B ratio of 1.55. 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, TSCO has a P/B of 6.23.
Based on these metrics and many more, DKS holds a Value grade of B, while TSCO has a Value grade of C.
DKS has seen stronger estimate revision activity and sports more attractive valuation metrics than TSCO, so it seems like value investors will conclude that DKS is the superior option right now.
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