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BBQ vs. CMG: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Retail - Restaurants stocks have likely encountered both BBQ Holdings (BBQ - Free Report) and Chipotle Mexican Grill (CMG - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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

BBQ Holdings and Chipotle Mexican Grill are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, 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 factor that value investors are interested in.

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 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 11.08, while CMG has a forward P/E of 43.04. We also note that BBQ has a PEG ratio of 0.79. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CMG currently has a PEG ratio of 2.15.

Another notable valuation metric for BBQ is its P/B ratio of 2.13. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CMG has a P/B of 17.75.

These are just a few of the metrics contributing to BBQ's Value grade of A and CMG's Value grade of D.

BBQ is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BBQ is likely the superior value option right now.


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Chipotle Mexican Grill, Inc. (CMG) - free report >>

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