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CBRL vs. SHAK: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Cracker Barrel Old Country Store (CBRL - Free Report) and Shake Shack (SHAK - 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.

Cracker Barrel Old Country Store has a Zacks Rank of #1 (Strong Buy), while Shake Shack 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 CBRL is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

CBRL currently has a forward P/E ratio of 44.81, while SHAK has a forward P/E of 64.30. We also note that CBRL has a PEG ratio of 1.66. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SHAK currently has a PEG ratio of 7.76.

Another notable valuation metric for CBRL is its P/B ratio of 3.26. 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, SHAK has a P/B of 5.43.

These are just a few of the metrics contributing to CBRL's Value grade of B and SHAK's Value grade of D.

CBRL stands above SHAK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CBRL is the superior value option right now.

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