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TACO vs. TXRH: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors interested in Retail - Restaurants stocks are likely familiar with Del Taco Restaurants (TACO) and Texas Roadhouse (TXRH). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Del Taco Restaurants and Texas Roadhouse are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TACO has an improving earnings outlook. 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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

TACO currently has a forward P/E ratio of 23.60, while TXRH has a forward P/E of 30.96. We also note that TACO has a PEG ratio of 1.57. 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. TXRH currently has a PEG ratio of 3.10.

Another notable valuation metric for TACO is its P/B ratio of 1.75. 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, TXRH has a P/B of 6.11.

These are just a few of the metrics contributing to TACO's Value grade of B and TXRH's Value grade of C.

TACO 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 TACO is likely the superior value option right now.


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Del Taco Restaurants, Inc. (TACO) : Free Stock Analysis Report
 
Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report
 
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