Back to top

Image: Bigstock

BBQ vs. WEN: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in Retail - Restaurants stocks are likely familiar with BBQ Holdings and Wendy's (WEN - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

BBQ Holdings has a Zacks Rank of #1 (Strong Buy), while Wendy's has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BBQ is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

BBQ currently has a forward P/E ratio of 14.02, while WEN has a forward P/E of 23.93. We also note that BBQ has a PEG ratio of 1. 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. WEN currently has a PEG ratio of 1.86.

Another notable valuation metric for BBQ is its P/B ratio of 2.70. 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, WEN has a P/B of 10.77.

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

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


See More Zacks Research for These Tickers


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


The Wendy's Company (WEN) - free report >>

Published in