Investors interested in Retail - Restaurants stocks are likely familiar with Wendy's (WEN) and Chipotle Mexican Grill (CMG). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Wendy's and Chipotle Mexican Grill are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle 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 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.
WEN currently has a forward P/E ratio of 30.67, while CMG has a forward P/E of 58.63. We also note that WEN has a PEG ratio of 2.13. 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. CMG currently has a PEG ratio of 3.05.
Another notable valuation metric for WEN is its P/B ratio of 6.96. 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, CMG has a P/B of 14.27.
These metrics, and several others, help WEN earn a Value grade of B, while CMG has been given a Value grade of D.
Both WEN and CMG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WEN is the superior value option right now.
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The Wendy's Company (WEN) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
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