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FRSH vs. TXRH: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Papa Murphy's Holdings (FRSH - Free Report) and Texas Roadhouse (TXRH - 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.

Papa Murphy's Holdings has a Zacks Rank of #1 (Strong Buy), while Texas Roadhouse has a Zacks Rank of #5 (Strong Sell) right now. Investors should feel comfortable knowing that FRSH likely has seen a stronger improvement to its earnings outlook than TXRH has recently. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

FRSH currently has a forward P/E ratio of 13.64, while TXRH has a forward P/E of 30.33. We also note that FRSH has a PEG ratio of 1.24. 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. TXRH currently has a PEG ratio of 2.56.

Another notable valuation metric for FRSH is its P/B ratio of 0.92. 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, TXRH has a P/B of 5.04.

Based on these metrics and many more, FRSH holds a Value grade of B, while TXRH has a Value grade of D.

FRSH has seen stronger estimate revision activity and sports more attractive valuation metrics than TXRH, so it seems like value investors will conclude that FRSH is the superior option right now.


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