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Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Cheesecake Factory (CAKE) and Chipotle Mexican Grill (CMG). 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 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.
Cheesecake Factory has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold) right now. This means that CAKE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.
CAKE currently has a forward P/E ratio of 14.57, while CMG has a forward P/E of 41.98. We also note that CAKE has a PEG ratio of 1.48. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CMG currently has a PEG ratio of 2.08.
Another notable valuation metric for CAKE is its P/B ratio of 6.22. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CMG has a P/B of 20.12.
Based on these metrics and many more, CAKE holds a Value grade of B, while CMG has a Value grade of F.
CAKE sticks out from CMG in both our Zacks Rank and Style Scores models, so value investors will likely feel that CAKE is the better option right now.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).