Investors with an interest in Retail - Restaurants stocks have likely encountered both Habit Restaurants (HABT) and Shake Shack (SHAK). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Right now, Habit Restaurants is sporting 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 HABT is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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 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.
HABT currently has a forward P/E ratio of 77.70, while SHAK has a forward P/E of 124.75. We also note that HABT has a PEG ratio of 3.89. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SHAK currently has a PEG ratio of 5.54.
Another notable valuation metric for HABT is its P/B ratio of 1.81. 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 9.39.
These metrics, and several others, help HABT earn a Value grade of B, while SHAK has been given a Value grade of F.
HABT sticks out from SHAK in both our Zacks Rank and Style Scores models, so value investors will likely feel that HABT is the better option right now.
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The Habit Restaurants, Inc. (HABT) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
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