U.S. Markets closed

DRI vs. WEN: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Darden Restaurants (DRI) or Wendy's (WEN). 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Darden Restaurants and Wendy's are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that DRI likely has seen a stronger improvement to its earnings outlook than WEN has recently. 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 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.

DRI currently has a forward P/E ratio of 20.21, while WEN has a forward P/E of 31.03. We also note that DRI has a PEG ratio of 1.97. 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. WEN currently has a PEG ratio of 2.31.

Another notable valuation metric for DRI is its P/B ratio of 6.21. 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, WEN has a P/B of 6.90.

These are just a few of the metrics contributing to DRI's Value grade of B and WEN's Value grade of D.

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
 
The Wendy's Company (WEN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.