Investors interested in stocks from the Retail - Miscellaneous sector have probably already heard of Office Depot (ODP) and Dick's Sporting Goods (DKS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Office Depot has a Zacks Rank of #1 (Strong Buy), while Dick's Sporting Goods has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ODP is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
ODP currently has a forward P/E ratio of 4.75, while DKS has a forward P/E of 124.33. We also note that ODP has a PEG ratio of 0.70. 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. DKS currently has a PEG ratio of 30.51.
Another notable valuation metric for ODP is its P/B ratio of 0.52. 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, DKS has a P/B of 2.13.
These are just a few of the metrics contributing to ODP's Value grade of A and DKS's Value grade of C.
ODP sticks out from DKS in both our Zacks Rank and Style Scores models, so value investors will likely feel that ODP is the better option right now.
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Office Depot, Inc. (ODP) : Free Stock Analysis Report
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
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