Investors interested in Retail - Supermarkets stocks are likely familiar with Tesco PLC (TSCDY) and Walmart (WMT). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Tesco PLC has a Zacks Rank of #1 (Strong Buy), while Walmart 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 TSCDY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TSCDY currently has a forward P/E ratio of 15.92, while WMT has a forward P/E of 40.79. We also note that TSCDY has a PEG ratio of 1.32. 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. WMT currently has a PEG ratio of 5.00.
Another notable valuation metric for TSCDY is its P/B ratio of 2.77. 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, WMT has a P/B of 8.77.
These metrics, and several others, help TSCDY earn a Value grade of A, while WMT has been given a Value grade of C.
TSCDY stands above WMT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TSCDY is the superior value option right now.
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Tesco PLC (TSCDY): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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