Investors with an interest in Retail - Miscellaneous stocks have likely encountered both Ulta Beauty (ULTA) and Tractor Supply (TSCO). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Ulta Beauty is sporting a Zacks Rank of #2 (Buy), while Tractor Supply has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ULTA likely has seen a stronger improvement to its earnings outlook than TSCO has recently. But this is just one piece of the puzzle 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.
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.
ULTA currently has a forward P/E ratio of 20.91, while TSCO has a forward P/E of 25.50. We also note that ULTA has a PEG ratio of 2.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. TSCO currently has a PEG ratio of 2.90.
Another notable valuation metric for ULTA is its P/B ratio of 8.77. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TSCO has a P/B of 11.02.
Based on these metrics and many more, ULTA holds a Value grade of B, while TSCO has a Value grade of C.
ULTA has seen stronger estimate revision activity and sports more attractive valuation metrics than TSCO, so it seems like value investors will conclude that ULTA is the superior option right now.
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Ulta Beauty Inc. (ULTA): Free Stock Analysis Report Tractor Supply Company (TSCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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