DRI vs. NDLS: Which Stock Is the Better Value Option?
Investors with an interest in Retail - Restaurants stocks have likely encountered both Darden Restaurants (DRI) and Noodles & Co. (NDLS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Darden Restaurants is sporting a Zacks Rank of #2 (Buy), while Noodles & Co. 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 DRI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
DRI currently has a forward P/E ratio of 16.98, while NDLS has a forward P/E of 321.67. We also note that DRI has a PEG ratio of 1.55. 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. NDLS currently has a PEG ratio of 36.76.
Another notable valuation metric for DRI is its P/B ratio of 5.31. 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, NDLS has a P/B of 12.17.
Based on these metrics and many more, DRI holds a Value grade of A, while NDLS has a Value grade of F.
DRI 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 DRI is likely the superior value option right now.
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Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Noodles & Company (NDLS) : Free Stock Analysis Report
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