Is Target (TGT) a Great Value Stock Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Target (TGT). TGT is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 13.31, which compares to its industry's average of 20.26. Over the past year, TGT's Forward P/E has been as high as 16.16 and as low as 10.95, with a median of 13.68.

We should also highlight that TGT has a P/B ratio of 3.58. 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. This stock's P/B looks solid versus its industry's average P/B of 9.37. Over the past 12 months, TGT's P/B has been as high as 4.21 and as low as 2.88, with a median of 3.54.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TGT has a P/S ratio of 0.54. This compares to its industry's average P/S of 0.64.

Finally, our model also underscores that TGT has a P/CF ratio of 7.51. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 18.47. TGT's P/CF has been as high as 8.51 and as low as 5.67, with a median of 7.39, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Target is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TGT feels like a great value stock at the moment.


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