Investors interested in Retail - Restaurants stocks are likely familiar with Compass Group PLC (CMPGY) 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Compass Group PLC has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #5 (Strong Sell) right now. Investors should feel comfortable knowing that CMPGY likely has seen a stronger improvement to its earnings outlook than CMG has recently. 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.
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.
CMPGY currently has a forward P/E ratio of 22.43, while CMG has a forward P/E of 27.13. We also note that CMPGY has a PEG ratio of 1.86. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CMG currently has a PEG ratio of 2.66.
Another notable valuation metric for CMPGY is its P/B ratio of 8.07. 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 13.19.
These are just a few of the metrics contributing to CMPGY's Value grade of B and CMG's Value grade of F.
CMPGY stands above CMG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CMPGY is the superior value option right now.
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Compass Group PLC (CMPGY): 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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