Investors with an interest in Retail - Discount Stores stocks have likely encountered both Dollar General (DG) and Ross Stores (ROST). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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.

Both Dollar General and Ross Stores have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

DG currently has a forward P/E ratio of 18.04, while ROST has a forward P/E of 23.69. We also note that DG has a PEG ratio of 2.61. 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. ROST currently has a PEG ratio of 2.96.

Another notable valuation metric for DG is its P/B ratio of 2.99. 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, ROST has a P/B of 9.12.

Based on these metrics and many more, DG holds a Value grade of A, while ROST has a Value grade of C.

Both DG and ROST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DG is the superior value option right now.

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Dollar General Corporation (DG):Free Stock Analysis Report

Ross Stores, Inc. (ROST):Free Stock Analysis Report

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

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