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Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Cheesecake Factory (CAKE) and Dutch Bros (BROS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Cheesecake Factory and Dutch Bros have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
CAKE currently has a forward P/E ratio of 14.31, while BROS has a forward P/E of 116.04. We also note that CAKE has a PEG ratio of 1.29. 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. BROS currently has a PEG ratio of 3.30.
Another notable valuation metric for CAKE is its P/B ratio of 6.10. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BROS has a P/B of 10.77.
These metrics, and several others, help CAKE earn a Value grade of A, while BROS has been given a Value grade of D.
Both CAKE and BROS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CAKE is the superior value option right now.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Dutch Bros Inc. (BROS) : Free Stock Analysis Report