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 stocks offers value investors a better bang for their buck right now? We'll need to 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.
First Watch Restaurant Group, Inc. has a Zacks Rank of #2 (Buy), while Portillo's Inc. has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that FWRG likely has seen a stronger improvement to its earnings outlook than PTLO has recently. 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.
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.
FWRG currently has a forward P/E ratio of 51.97, while PTLO has a forward P/E of 73.70. We also note that FWRG has a PEG ratio of 1.38. 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.
Another notable valuation metric for FWRG is its P/B ratio of 2.09. 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, PTLO has a P/B of 2.32.
Based on these metrics and many more, FWRG holds a Value grade of B, while PTLO has a Value grade of C.
FWRG stands above PTLO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FWRG is the superior value option right now.
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