Investors looking for stocks in the Retail - Restaurants sector might want to consider either Cheesecake Factory (CAKE) or Dutch Bros (BROS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Cheesecake Factory and Dutch Bros are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
CAKE currently has a forward P/E ratio of 15.01, while BROS has a forward P/E of 95.39. We also note that CAKE has a PEG ratio of 1.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. BROS currently has a PEG ratio of 3.13.
Another notable valuation metric for CAKE is its P/B ratio of 7.02. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BROS has a P/B of 12.73.
These are just a few of the metrics contributing to CAKE's Value grade of A and BROS's Value grade of F.
Both CAKE and BROS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CAKE is the superior value option right now.
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The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis Report Dutch Bros Inc. (BROS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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