Target Corporation (NYSE:TGT) and Wal-Mart Stores Inc (NYSE:WMT) are often thrown together in the same all-in-one, discount retailer box, but TGT stock is its own animal.

Target skews towards a higher-income demographic, while Walmart skews towards a lower-income demographic, but aside from that, the two are often viewed by consumers as largely one in the same.

That was the case on Wall Street.

Not so much anymore.

TGT stock and WMT have more or less mirrored each other for the past decade. As one goes up, the other goes up. As one goes down, the other goes down.

That decade-long trend has broken in a big way recently. WMT stock has surged 40% higher this year, while TGT stock has fallen more than 20%.

The drastic difference in performance of these two stocks is telling us that not only is WMT kicking TGT’s butt, but that this butt-kicking will last into the foreseeable future.

I don’t buy that thesis. WMT is doing a lot better right now, mostly due robust digital growth, but TGT won’t be left in the dust forever. These two are interlocked in a decades-long competition wherein one wins and losses are exchanged with equal frequency.

Just look back at 2014-15. TGT stock was surging while WMT was dropping. Now, the tide has turned. With time, it will turn again.

That makes buying TGT stock here and now during its massive underperformance seem like the smart move.

Retail Is Rebounding

The biggest risk hanging over TGT stock is the death of brick-and-mortar retail.

But that death simply isn’t happening.

The retail landscape is changing thanks to e-commerce and Amazon.com, Inc. (NASDAQ:AMZN). But brick-and-mortar retail isn’t dying and being eaten alive entirely by Amazon. It is just shrinking.

That shrinking may be close to over. Look no further than the slew of positive retail earnings numbers we have received from retailers recently.

Beaten up sneaker retailer Foot Locker, Inc. (NYSE:FL) just reported much better than expected numbers. Same with Shoe Carnival, Inc. (NASDAQ:SCVL), Gap Inc (NYSE:GPS), and Abercrombie & Fitch Co. (NYSE:ANF).

This follows a quarter wherein teen retailers like American Eagle Outfitters (NYSE:AEO) and Urban Outfitters, Inc. (NASDAQ:URBN) soared on positive numbers. Target and Walmart also both reported positive comps last quarter.

Overall, things are starting to look up in retail. This is a rising tide that will lift all boats, TGT stock included.

TGT Stock Is At Decade Lows

The thing that makes TGT stock so attractive is that its valuation is severely depressed against an increasingly favorable retail backdrop.

TGT stock is trading at just 5.7x trailing EBITDA. That is a decade low. Meanwhile, the dividend yield is at 4.3%. That is a decade high.

WMT stock is trading at nearly twice as big of a valuation (10.4x EBITDA) with a dividend yield that is half as big (2.1%).

Over the past decade, WMT and TGT stocks have had very similar valuations and yields.

Moreover, TGT’s 5-year average price-to-earnings multiple is 17. It stands at just 11 today.

The reason for the depressed valuation is that earnings are actually expected to compress over the next several years due to higher shipping expenses and minimum wage hikes (TGT is raising its minimum wage from $11 to $15 by 2020). Flattish comp growth plus margin compression leads to earnings going down.

But that earnings compression should be largely over by 2019, once the digital business scales and most of the labor expense hikes are in the rear-view mirror.

At that point in time, earnings will start growing again and TGT stock should be valued similar to how it was valued over the past 5 years.

Earnings in 2019 are expected to be $4.30 per share. A 17x multiple on that estimate implies a 2-year forward price target of $73. Discount that back by 10% per year, and you get to a fair value of over $60.

Bottom Line on TGT Stock

Near-term margin concerns are hanging over TGT stock and keeping the valuation depressed. But with retail in rebound mode, TGT stock will likely be a big winner due to that depressed valuation.

All else equal, I’m a buyer of TGT stock below $60.

As of this writing, Luke Lango was long TGT, AMZN, FL, and GPS.