Investors looking for stocks in the Retail - Restaurants sector might want to consider either Cheesecake Factory (CAKE) or Texas Roadhouse (TXRH). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Cheesecake Factory has a Zacks Rank of #2 (Buy), while Texas Roadhouse has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that CAKE likely has seen a stronger improvement to its earnings outlook than TXRH has recently. But this is just one factor that value investors are interested in.
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.
CAKE currently has a forward P/E ratio of 17.13, while TXRH has a forward P/E of 23.28. We also note that CAKE has a PEG ratio of 1.32. 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. TXRH currently has a PEG ratio of 2.07.
Another notable valuation metric for CAKE is its P/B ratio of 3.80. 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, TXRH has a P/B of 3.88.
Based on these metrics and many more, CAKE holds a Value grade of B, while TXRH has a Value grade of D.
CAKE 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 CAKE is likely the superior value option right now.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report
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