Are Investors Undervaluing Brinker International (EAT) Right Now?
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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 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 a P/E ratio of 10.83, which compares to its industry's average of 24.53. Over the last 12 months, EAT's Forward P/E has been as high as 12.77 and as low as 5.54, with a median of 9.13.
Investors will also notice that EAT has a PEG ratio of 1.52. 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 1.86. EAT's PEG has been as high as 1.75 and as low as 0.47, with a median of 0.86, all within the past year.
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 0.41. This compares to its industry's average P/S of 1.04.
Finally, we should also recognize that EAT has a P/CF ratio of 6.90. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 20.34. EAT's P/CF has been as high as 7.62 and as low as 3.22, with a median of 5.26, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Brinker International is likely undervalued currently. And when considering the strength of its earnings outlook, EAT sticks out at as one of the market's strongest value stocks.
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