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 companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
BJ's Restaurants and Chipotle Mexican Grill are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, 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 just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 22.78, while CMG has a forward P/E of 42.10. We also note that BJRI has a PEG ratio of 1.63. 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 2.52.
Another notable valuation metric for BJRI is its P/B ratio of 2.49. 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 19.60.
These are just a few of the metrics contributing to BJRI's Value grade of B 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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