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Investors looking for stocks in the Retail - Restaurants sector might want to consider either Chuy's Holdings (CHUY) or Restaurant Brands (QSR). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Chuy's Holdings and Restaurant Brands 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 CHUY 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CHUY currently has a forward P/E ratio of 16.66, while QSR has a forward P/E of 18.48. We also note that CHUY has a PEG ratio of 0.95. 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. QSR currently has a PEG ratio of 1.47.
Another notable valuation metric for CHUY is its P/B ratio of 1.61. 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, QSR has a P/B of 3.86.
These are just a few of the metrics contributing to CHUY's Value grade of B and QSR's Value grade of C.
CHUY stands above QSR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CHUY is the superior value option right now.
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