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Interior of a Real Canadian Superstore, owned by Loblaw, in Calgary.

LARRY MACDOUGAL/Larry MacDougal/The Canadian Press

Canadian retail stocks are looking cheap -- according to a Bloomberg News report, they've dropped to their lowest level since January 2005 compared with U.S. peers, amid increasing competition from Wal-Mart Stores Inc. and Target Corp. , the biggest American discounters.

The ratio between the S&P/Toronto Stock Exchange Retailing Index and its counterpart in the Standard & Poor's 500 narrowed this week to 4, the smallest number in six years, Bloomberg data showed.

Analysts say the retailers that are likely to be the biggest losers because of cash-rich Target's entry into Canada include Canadian Tire Corp. and grocery chain Loblaw Cos. , which has been expanding non-food sales in recent years.

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Still, Loblaw, Empire Co. and Metro Inc. each have more "buy" ratings from analysts than "hold" and "sell" ratings combined.

And if you're looking for bargains: Loblaw's price per dollar of analysts' forecast profit fell to the lowest since at least 2005 last month (its forward price-earnings ratio is about 14, according to Globe Investor data). The valuation of Reitmans Canada Ltd., the country's largest chain of women's apparel stores, has fallen to 12.5, the lowest since April 2009.

Canadian Tire and Loblaw shares have increased fivefold since the end of 1994.

If you'd rather bet on the other team, though, here's a thoughtful analysis by the Globe's David Parkinson: Investing in the U.S. retail invasion

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About the Author
Deputy head of Audience

Sonali Verma is deputy head of audience at the Globe and Mail. She is a business journalist with more than 20 years of experience, mainly in digital media.She was previously the Globe and Mail’s senior editor in charge of audience engagement, overseeing its homepages as well as social media operations. More

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