Investors looking for stocks in the Retail - Restaurants sector might want to consider either Cracker Barrel Old Country Store (CBRL) or 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.
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, Cracker Barrel Old Country Store has a Zacks Rank of #2 (Buy), while Shake Shack has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CBRL 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 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CBRL currently has a forward P/E ratio of 17.40, while SHAK has a forward P/E of 96.60. We also note that CBRL has a PEG ratio of 1.74. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SHAK currently has a PEG ratio of 3.86.
Another notable valuation metric for CBRL is its P/B ratio of 6.48. 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 7.36.
Based on these metrics and many more, CBRL holds a Value grade of B, while SHAK has a Value grade of F.
CBRL 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 CBRL is likely the superior value option right now.
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Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
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