Investors looking for stocks in the Retail - Restaurants sector might want to consider either Carrols Restaurant Group (TAST - Free Report) or Shake Shack (SHAK - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Carrols Restaurant Group has a Zacks Rank of #2 (Buy), while Shake Shack has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TAST likely has seen a stronger improvement to its earnings outlook than SHAK has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TAST currently has a forward P/E ratio of 45.31, while SHAK has a forward P/E of 95.89. We also note that TAST has a PEG ratio of 2.27. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SHAK currently has a PEG ratio of 4.26.
Another notable valuation metric for TAST is its P/B ratio of 3.35. 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 8.45.
These are just a few of the metrics contributing to TAST's Value grade of A and SHAK's Value grade of D.
TAST 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 TAST is likely the superior value option right now.