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HABT or SHAK: Which Is the Better Value Stock Right Now?

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Investors interested in Retail - Restaurants stocks are likely familiar with Habit Restaurants and Shake Shack (SHAK - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Habit Restaurants and Shake Shack are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that HABT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

HABT currently has a forward P/E ratio of 74.96, while SHAK has a forward P/E of 125.79. We also note that HABT has a PEG ratio of 3.75. 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. SHAK currently has a PEG ratio of 5.59.

Another notable valuation metric for HABT is its P/B ratio of 1.75. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SHAK has a P/B of 9.55.

These metrics, and several others, help HABT earn a Value grade of B, while SHAK has been given a Value grade of F.

HABT sticks out from SHAK in both our Zacks Rank and Style Scores models, so value investors will likely feel that HABT is the better option right now.


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