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Investors looking for stocks in the Retail - Restaurants sector might want to consider either Cheesecake Factory (CAKE) or Compass Group PLC (CMPGY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Cheesecake Factory has a Zacks Rank of #2 (Buy), while Compass Group PLC has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that CAKE likely has seen a stronger improvement to its earnings outlook than CMPGY has recently. But this is just one factor that value investors are interested in.
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.
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 13.08, while CMPGY has a forward P/E of 24.39. We also note that CAKE has a PEG ratio of 1.21. 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. CMPGY currently has a PEG ratio of 1.97.
Another notable valuation metric for CAKE is its P/B ratio of 5.73. 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, CMPGY has a P/B of 8.60.
These metrics, and several others, help CAKE earn a Value grade of A, while CMPGY has been given a Value grade of C.
CAKE stands above CMPGY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CAKE is the superior value option right now.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Compass Group PLC (CMPGY) : Free Stock Analysis Report