Investors interested in Retail - Restaurants stocks are likely familiar with BJ's Restaurants (BJRI) and Chipotle Mexican Grill (CMG). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Currently, BJ's Restaurants has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BJRI has an improving earnings outlook. However, value investors will care about much more than just this.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BJRI currently has a forward P/E ratio of 20.78, while CMG has a forward P/E of 41.35. We also note that BJRI has a PEG ratio of 1.48. 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. CMG currently has a PEG ratio of 2.47.
Another notable valuation metric for BJRI is its P/B ratio of 2.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CMG has a P/B of 19.44.
These are just a few of the metrics contributing to BJRI's Value grade of A and CMG's 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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