Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Fiesta Restaurant Group, Inc. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Fiesta Restaurant Group has a trailing twelve months PE ratio of 18.0, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.4. If we focus on the long-term PE trend, Fiesta Restaurant Group’s current PE level puts it below its midpoint over the past five years, with the number having fallen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Retail - Restaurants industry’s trailing twelve months PE ratio, which stands at 27.5. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that Fiesta Restaurant Group has a forward PE ratio (price relative to this year’s earnings) of just 17.9, so it is fair to say that a slightly more value-oriented path may be ahead for Fiesta Restaurant Group stock in the near term.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Fiesta Restaurant Group’s PEG ratio stands at just 1.23, compared with the Zacks Retail - Restaurants industry average of 1.71. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Fiesta Restaurant Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Fiesta Restaurant Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 8.4, which is far better than the industry average of 9.9. Clearly, FRGI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Fiesta Restaurant Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘D’. This gives FRGI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen two up and twodown in the same time period.
As a result, the current quarter consensus estimate has risen by 9.4% in the past two months, while the full year estimate has inched up by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Fiesta Restaurant Groupis an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a better industry rank (top 35% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Retail - Restaurants industry has clearly underperformed the broader market, as you can see below:
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So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Fiesta Restaurant Group a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Fiesta Restaurant Group, Inc. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Fiesta Restaurant Group has a trailing twelve months PE ratio of 18.0, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.4. If we focus on the long-term PE trend, Fiesta Restaurant Group’s current PE level puts it below its midpoint over the past five years, with the number having fallen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Retail - Restaurants industry’s trailing twelve months PE ratio, which stands at 27.5. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that Fiesta Restaurant Group has a forward PE ratio (price relative to this year’s earnings) of just 17.9, so it is fair to say that a slightly more value-oriented path may be ahead for Fiesta Restaurant Group stock in the near term.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Fiesta Restaurant Group’s PEG ratio stands at just 1.23, compared with the Zacks Retail - Restaurants industry average of 1.71. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Fiesta Restaurant Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Fiesta Restaurant Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 8.4, which is far better than the industry average of 9.9. Clearly, FRGI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Fiesta Restaurant Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘D’. This gives FRGI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen two up and twodown in the same time period.
As a result, the current quarter consensus estimate has risen by 9.4% in the past two months, while the full year estimate has inched up by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Fiesta Restaurant Group, Inc. Price and Consensus
Fiesta Restaurant Group, Inc. Price and Consensus | Fiesta Restaurant Group, Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Fiesta Restaurant Groupis an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a better industry rank (top 35% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Retail - Restaurants industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>