Investors interested in stocks from the Retail - Restaurants sector have probably already heard of BJ's Restaurants (BJRI) and Shake Shack (SHAK). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
BJ's Restaurants and Shake Shack are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BJRI is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BJRI currently has a forward P/E ratio of 23.34, while SHAK has a forward P/E of 69.84. We also note that BJRI has a PEG ratio of 1.61. 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. SHAK currently has a PEG ratio of 3.10.
Another notable valuation metric for BJRI is its P/B ratio of 3.68. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SHAK has a P/B of 6.54.
These metrics, and several others, help BJRI earn a Value grade of B, while SHAK has been given a Value grade of D.
BJRI has seen stronger estimate revision activity and sports more attractive valuation metrics than SHAK, so it seems like value investors will conclude that BJRI is the superior option right now.
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BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
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