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 stocks offers value investors a better bang for their buck right now? We'll need to 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both Cheesecake Factory and Dutch Bros are sporting a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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 14.51, while BROS has a forward P/E of 77.35. We also note that CAKE has a PEG ratio of 1.30. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BROS currently has a PEG ratio of 2.54.
Another notable valuation metric for CAKE is its P/B ratio of 6.79. 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, BROS has a P/B of 10.32.
These metrics, and several others, help CAKE earn a Value grade of A, while BROS has been given a Value grade of D.
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.
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
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).
Zacks Investment Research
