Back to top

Image: Bigstock

TACO vs. TXRH: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Del Taco Restaurants or Texas Roadhouse (TXRH - 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.

Currently, Del Taco Restaurants has a Zacks Rank of #2 (Buy), while Texas Roadhouse has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TACO has an improving earnings outlook. However, value investors will care about much more than just this.

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.

TACO currently has a forward P/E ratio of 32.04, while TXRH has a forward P/E of 196.34. We also note that TACO has a PEG ratio of 2.14. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TXRH currently has a PEG ratio of 19.63.

Another notable valuation metric for TACO is its P/B ratio of 1.50. 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, TXRH has a P/B of 4.88.

These metrics, and several others, help TACO earn a Value grade of B, while TXRH has been given a Value grade of C.

TACO has seen stronger estimate revision activity and sports more attractive valuation metrics than TXRH, so it seems like value investors will conclude that TACO is the superior option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Texas Roadhouse, Inc. (TXRH) - free report >>

Published in