Investors interested in Retail - Restaurants stocks are likely familiar with Bloomin' Brands (BLMN) and Wendy's (WEN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Bloomin' Brands is sporting a Zacks Rank of #2 (Buy), while Wendy's has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BLMN is likely seeing its earnings outlook improve to a greater extent. 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 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.
BLMN currently has a forward P/E ratio of 8.38, while WEN has a forward P/E of 20.88. We also note that BLMN has a PEG ratio of 0.68. 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 2.16.
Another notable valuation metric for BLMN is its P/B ratio of 7.78. 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, WEN has a P/B of 9.35.
Based on these metrics and many more, BLMN holds a Value grade of A, while WEN has a Value grade of C.
BLMN sticks out from WEN in both our Zacks Rank and Style Scores models, so value investors will likely feel that BLMN is the better option right now.
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