DG vs. TJX: Which Stock Is the Better Value Option?

Investors interested in Retail - Discount Stores stocks are likely familiar with Dollar General (DG) and TJX (TJX). 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, Dollar General is sporting a Zacks Rank of #2 (Buy), while TJX 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 DG has an improving earnings outlook. But this is only part of the picture for value investors.

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.

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.

DG currently has a forward P/E ratio of 16.30, while TJX has a forward P/E of 29.08. We also note that DG has a PEG ratio of 1.83. 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. TJX currently has a PEG ratio of 3.26.

Another notable valuation metric for DG is its P/B ratio of 3. 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, TJX has a P/B of 16.02.

These metrics, and several others, help DG earn a Value grade of A, while TJX has been given a Value grade of D.

DG stands above TJX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DG is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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