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Are Investors Undervaluing Brinker International (EAT) Right Now?

Zacks Equity Research
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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Brinker International (EAT). EAT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.13, which compares to its industry's average of 22.59. Over the past 52 weeks, EAT's Forward P/E has been as high as 13.96 and as low as 9.46, with a median of 12.06.

EAT is also sporting a PEG ratio of 1.26. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. EAT's industry has an average PEG of 1.91 right now. Within the past year, EAT's PEG has been as high as 1.57 and as low as 0.87, with a median of 1.25.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. EAT has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.94.

Finally, our model also underscores that EAT has a P/CF ratio of 5.73. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 17.22. Over the past 52 weeks, EAT's P/CF has been as high as 8.40 and as low as 5.29, with a median of 6.82.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Brinker International is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, EAT feels like a great value stock at the moment.


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