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 offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
BJ's Restaurants has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that BJRI likely has seen a stronger improvement to its earnings outlook than CMG has recently. But this is only part of the picture for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BJRI currently has a forward P/E ratio of 14.52, while CMG has a forward P/E of 34.01. We also note that BJRI has a PEG ratio of 1.04. 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. CMG currently has a PEG ratio of 2.09.
Another notable valuation metric for BJRI is its P/B ratio of 1.78. 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, CMG has a P/B of 15.54.
Based on these metrics and many more, BJRI holds a Value grade of A, while CMG has 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.
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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).
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