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RUTH or CMG: Which Is the Better Value Stock Right Now?

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Investors with an interest in Retail - Restaurants stocks have likely encountered both Ruth's Hospitality and Chipotle Mexican Grill (CMG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

Ruth's Hospitality and Chipotle Mexican Grill are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.

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 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.

RUTH currently has a forward P/E ratio of 16.22, while CMG has a forward P/E of 56.45. We also note that RUTH has a PEG ratio of 1.20. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CMG currently has a PEG ratio of 2.88.

Another notable valuation metric for RUTH is its P/B ratio of 7.78. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CMG has a P/B of 13.29.

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

Both RUTH and CMG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RUTH is the superior value option right now.


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