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Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Bloomin' Brands (BLMN) and Wendy's (WEN). But which of these two stocks presents investors with the better value opportunity right now? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Bloomin' Brands and Wendy's are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BLMN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
BLMN currently has a forward P/E ratio of 11.84, while WEN has a forward P/E of 30.48. We also note that BLMN has a PEG ratio of 1.18. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WEN currently has a PEG ratio of 2.12.
Another notable valuation metric for BLMN is its P/B ratio of 6.79. 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, WEN has a P/B of 6.90.
These are just a few of the metrics contributing to BLMN's Value grade of A and WEN's Value grade of C.
BLMN 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 BLMN is likely the superior value option right now.
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