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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 company value investors might notice is BJ's Restaurants (BJRI). BJRI is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 15.27 right now. For comparison, its industry sports an average P/E of 24.45. Over the last 12 months, BJRI's Forward P/E has been as high as 28.43 and as low as 15.09, with a median of 22.34.
BJRI is also sporting a PEG ratio of 1.09. 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. BJRI's industry has an average PEG of 2.05 right now. Within the past year, BJRI's PEG has been as high as 2.03 and as low as 1.08, with a median of 1.60.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. BJRI has a P/S ratio of 0.54. This compares to its industry's average P/S of 0.82.
Finally, we should also recognize that BJRI has a P/CF ratio of 7.60. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 22.40. Over the past year, BJRI's P/CF has been as high as 11.18 and as low as 6.72, with a median of 8.50.
Investors could also keep in mind The Cheesecake Factory (CAKE), another Retail - Restaurants stock with a Zacks Rank of #2 (Buy) and Value grade of A.
Shares of The Cheesecake Factory currently hold a Forward P/E ratio of 14.99, and its PEG ratio is 1.34. In comparison, its industry sports average P/E and PEG ratios of 24.45 and 2.05.
CAKE's Forward P/E has been as high as 17.61 and as low as 10.44, with a median of 13.70. During the same time period, its PEG ratio has been as high as 1.64, as low as 0.96, with a median of 1.27.
The Cheesecake Factory sports a P/B ratio of 7.53 as well; this compares to its industry's price-to-book ratio of -114.44. In the past 52 weeks, CAKE's P/B has been as high as 9.08, as low as 4.91, with a median of 6.40.
Value investors will likely look at more than just these metrics, but the above data helps show that BJ's Restaurants and The Cheesecake Factory are likely undervalued currently. And when considering the strength of its earnings outlook, BJRI and CAKE sticks out as one of the market's strongest value stocks.
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BJ's Restaurants, Inc. (BJRI): Free Stock Analysis Report The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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