Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Bojangles (BOJA) and Starbucks (SBUX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Bojangles has a Zacks Rank of #2 (Buy), while Starbucks has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BOJA has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BOJA currently has a forward P/E ratio of 22.69, while SBUX has a forward P/E of 25.56. We also note that BOJA has a PEG ratio of 1.82. 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. SBUX currently has a PEG ratio of 1.89.
Another notable valuation metric for BOJA is its P/B ratio of 2.03. 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, SBUX has a P/B of 77.59.
These metrics, and several others, help BOJA earn a Value grade of B, while SBUX has been given a Value grade of C.
BOJA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BOJA is likely the superior value option right now.
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Bojangles', Inc. (BOJA) : Free Stock Analysis Report
Starbucks Corporation (SBUX) : Free Stock Analysis Report
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