Investors interested in Retail - Restaurants stocks are likely familiar with Ruth's Hospitality (RUTH - Free Report) and Wendy's (WEN - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ruth's Hospitality has a Zacks Rank of #1 (Strong Buy), while Wendy's has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RUTH is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
RUTH currently has a forward P/E ratio of 13.58, while WEN has a forward P/E of 34.27. We also note that RUTH has a PEG ratio of 1.01. 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 3.04.
Another notable valuation metric for RUTH is its P/B ratio of 7. 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 7.77.
These are just a few of the metrics contributing to RUTH's Value grade of B and WEN's Value grade of D.
RUTH stands above WEN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RUTH is the superior value option right now.