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Is BJ's Restaurants (BJRI) a Suitable Value Pick at the Moment?
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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 BJ’s Restaurants, Inc. (BJRI - Free Report) 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, BJ’s Restaurants has a trailing twelve months PE ratio of 20.49. This level compares similarly with the market at large, as the PE ratio for the S&P 500 comes in at about 20.48.
If we focus on the long-term trend of the stock the current level puts BJ’s Restaurants’ current PE near its lows. The current PE is well below its median for the term (which stands at 29.74), and the number has been on a general downtrend since its peak in 2014. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE also compares favorably with the Zacks classified Retail - Restaurants industry’s trailing twelve months PE ratio, which stands at 27.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that BJ’s Restaurants has a forward PE ratio (price relative to this year’s earnings) of 22.07, higher than the current figure. Delving deeper into the PE’s inputs we observed that the company’s earnings are expected to see a slight dip this year, which would serve to inflate the PE ratio. A soft consumer spending environment in the U.S. restaurant space has been hurting BJ's Restaurants comps growth and putting sales under pressure. In fact, most restaurateurs have been experiencing a similar fate. However, earnings are expected to stabilize 2018 onwards.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, BJ’s Restaurants has a P/S ratio of about 0.83. This is significantly lower than the Zacks categorized Retail – Restaurants industry average, which comes in at 3.63 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
This clearly suggests some level of undervalued trading for BJRI—at least compared to historical norms.
Broad Value Outlook
In aggregate, BJ’s Restaurants 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 BJ’s Restaurants a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for BJ’s Restaurants is just 1.25, a level that is lower than the industry average of 1.77. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 6.33, which is far better than the industry average of 9.80. Clearly, BJRI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though BJ’s Restaurants 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 ‘A’ and a Momentum score of ‘B’. This gives BJRI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, BJ’s Restaurants seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates go higher in the past sixty days compared to five lower, while the full year estimate has seen four upward revisions and two downward revisions in the same time period.
This has had just a small but meaningful impact on the consensus estimate though as the current quarter consensus estimate has declined 5.5% in the past two months, while the full year estimate has moved higher by 2.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The combination of these somewhat mixed factors 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
BJ’s Restaurants is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a strong industry rank (Top 39% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, the restaurant industry has been experiencing low consumption over the last few quarters as consumer discretionary spending in this space has been pretty sluggish. In addition, high labor costs as well as the company’s investments in several initiatives have been weighing on margins.
Nevertheless, in order to navigate through the challenging macro environment, the company has implemented four major sales building initiatives in 2017, which have been tested over the past year. Increased focus on technology-driven initiatives, like digital ordering, should also boost sales. Additionally, a deep pipeline of new menu items, loyalty program enhancements and other productivity initiatives are likely to further drive performance.
So, value investors might want to wait for estimates and analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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Is BJ's Restaurants (BJRI) a Suitable Value Pick at the Moment?
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 BJ’s Restaurants, Inc. (BJRI - Free Report) 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, BJ’s Restaurants has a trailing twelve months PE ratio of 20.49. This level compares similarly with the market at large, as the PE ratio for the S&P 500 comes in at about 20.48.
If we focus on the long-term trend of the stock the current level puts BJ’s Restaurants’ current PE near its lows. The current PE is well below its median for the term (which stands at 29.74), and the number has been on a general downtrend since its peak in 2014. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE also compares favorably with the Zacks classified Retail - Restaurants industry’s trailing twelve months PE ratio, which stands at 27.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that BJ’s Restaurants has a forward PE ratio (price relative to this year’s earnings) of 22.07, higher than the current figure. Delving deeper into the PE’s inputs we observed that the company’s earnings are expected to see a slight dip this year, which would serve to inflate the PE ratio. A soft consumer spending environment in the U.S. restaurant space has been hurting BJ's Restaurants comps growth and putting sales under pressure. In fact, most restaurateurs have been experiencing a similar fate. However, earnings are expected to stabilize 2018 onwards.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, BJ’s Restaurants has a P/S ratio of about 0.83. This is significantly lower than the Zacks categorized Retail – Restaurants industry average, which comes in at 3.63 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
This clearly suggests some level of undervalued trading for BJRI—at least compared to historical norms.
Broad Value Outlook
In aggregate, BJ’s Restaurants 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 BJ’s Restaurants a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for BJ’s Restaurants is just 1.25, a level that is lower than the industry average of 1.77. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 6.33, which is far better than the industry average of 9.80. Clearly, BJRI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though BJ’s Restaurants 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 ‘A’ and a Momentum score of ‘B’. This gives BJRI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, BJ’s Restaurants seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates go higher in the past sixty days compared to five lower, while the full year estimate has seen four upward revisions and two downward revisions in the same time period.
This has had just a small but meaningful impact on the consensus estimate though as the current quarter consensus estimate has declined 5.5% in the past two months, while the full year estimate has moved higher by 2.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
BJ's Restaurants, Inc. Price and Consensus
BJ's Restaurants, Inc. Price and Consensus | BJ's Restaurants, Inc. Quote
The combination of these somewhat mixed factors 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
BJ’s Restaurants is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a strong industry rank (Top 39% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, the restaurant industry has been experiencing low consumption over the last few quarters as consumer discretionary spending in this space has been pretty sluggish. In addition, high labor costs as well as the company’s investments in several initiatives have been weighing on margins.
Nevertheless, in order to navigate through the challenging macro environment, the company has implemented four major sales building initiatives in 2017, which have been tested over the past year. Increased focus on technology-driven initiatives, like digital ordering, should also boost sales. Additionally, a deep pipeline of new menu items, loyalty program enhancements and other productivity initiatives are likely to further drive performance.
So, value investors might want to wait for estimates and analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>