Investors with an interest in Retail - Restaurants stocks have likely encountered both 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
BJ's Restaurants has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #5 (Strong Sell) right now. 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 18.15, while CMG has a forward P/E of 32.97. We also note that BJRI has a PEG ratio of 1.30. 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 2.30.
Another notable valuation metric for BJRI is its P/B ratio of 2.56. 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 17.27.
These metrics, and several others, help BJRI earn a Value grade of A, while CMG has been given a Value grade of F.
BJRI stands above CMG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BJRI is the superior value 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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