Investors interested in stocks from the Retail - Restaurants sector have probably already heard of BJ's Restaurants (BJRI) and Chipotle Mexican Grill (CMG). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, BJ's Restaurants is sporting a Zacks Rank of #1 (Strong Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). This means that BJRI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BJRI currently has a forward P/E ratio of 14.50, while CMG has a forward P/E of 32.88. We also note that BJRI has a PEG ratio of 1.04. 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. CMG currently has a PEG ratio of 2.02.
Another notable valuation metric for BJRI is its P/B ratio of 1.75. 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, CMG has a P/B of 15.08.
These metrics, and several others, help BJRI earn a Value grade of A, while CMG has been given a Value grade of D.
BJRI sticks out from CMG in both our Zacks Rank and Style Scores models, so value investors will likely feel that BJRI is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BJ's Restaurants, Inc. (BJRI): Free Stock Analysis Report Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
