Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Ruth's Hospitality (RUTH - Free Report) and Wendy's (WEN - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ruth's Hospitality and Wendy's are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that RUTH likely has seen a stronger improvement to its earnings outlook than WEN has recently. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
RUTH currently has a forward P/E ratio of 14.67, while WEN has a forward P/E of 33.36. We also note that RUTH has a PEG ratio of 1.09. 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. WEN currently has a PEG ratio of 2.96.
Another notable valuation metric for RUTH is its P/B ratio of 7.46. 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, WEN has a P/B of 7.56.
These are just a few of the metrics contributing to RUTH's Value grade of B and WEN's Value grade of C.
RUTH sticks out from WEN in both our Zacks Rank and Style Scores models, so value investors will likely feel that RUTH is the better option right now.