Investors looking for stocks in the Retail - Restaurants sector might want to consider either First Watch Restaurant Group, Inc. (FWRG) or Portillo's Inc. (PTLO). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, First Watch Restaurant Group, Inc. has a Zacks Rank of #2 (Buy), while Portillo's Inc. has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FWRG has an improving earnings outlook. But this is just one factor that value investors are interested in.
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 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.
FWRG currently has a forward P/E ratio of 50.92, while PTLO has a forward P/E of 77.03. We also note that FWRG has a PEG ratio of 1.35. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. PTLO currently has a PEG ratio of 10.45.
Another notable valuation metric for FWRG is its P/B ratio of 2.01. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, PTLO has a P/B of 2.40.
These are just a few of the metrics contributing to FWRG's Value grade of B and PTLO's Value grade of D.
FWRG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that FWRG is likely the superior value option right now.
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