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Are Investors Undervaluing Brinker International (EAT) Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Brinker International (EAT). EAT is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.65 right now. For comparison, its industry sports an average P/E of 25.40. Over the past year, EAT's Forward P/E has been as high as 13.91 and as low as 9.23, with a median of 11.57.

EAT is also sporting a PEG ratio of 1.18. 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. EAT's industry currently sports an average PEG of 2.15. Over the last 12 months, EAT's PEG has been as high as 1.57 and as low as 0.99, with a median of 1.26.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. 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 0.46. This compares to its industry's average P/S of 0.93.

Finally, our model also underscores that EAT has a P/CF ratio of 4.97. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 18.73. Over the past year, EAT's P/CF has been as high as 8.20 and as low as 4.75, with a median of 6.29.

These are just a handful of the figures considered in Brinker International's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that EAT is an impressive value stock right now.


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