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YUMC or WEN: Which Is the Better Value Stock Right Now?

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Investors with an interest in Retail - Restaurants stocks have likely encountered both Yum China Holdings (YUMC - Free Report) and Wendy's (WEN - 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Yum China Holdings has a Zacks Rank of #2 (Buy), while Wendy's has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that YUMC has an improving earnings outlook. But this is only part of the picture for value investors.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

YUMC currently has a forward P/E ratio of 27.42, while WEN has a forward P/E of 37.16. We also note that YUMC has a PEG ratio of 3.06. 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. WEN currently has a PEG ratio of 3.29.

Another notable valuation metric for YUMC is its P/B ratio of 5.74. 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, WEN has a P/B of 7.79.

Based on these metrics and many more, YUMC holds a Value grade of B, while WEN has a Value grade of C.

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

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