Investors interested in Retail - Restaurants stocks are likely familiar with Potbelly (PBPB) and Shake Shack (SHAK). 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.
Currently, Potbelly has a Zacks Rank of #1 (Strong 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 PBPB is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PBPB currently has a forward P/E ratio of 27.14, while SHAK has a forward P/E of 66.05. We also note that PBPB has a PEG ratio of 1.55. 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. SHAK currently has a PEG ratio of 2.94.
Another notable valuation metric for PBPB is its P/B ratio of 1.93. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHAK has a P/B of 6.47.
These are just a few of the metrics contributing to PBPB's Value grade of A and SHAK's Value grade of D.
PBPB 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 PBPB is likely the superior value option right now.
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Potbelly Corporation (PBPB) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
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