Investors looking for stocks in the Retail - Restaurants sector might want to consider either Aramark (ARMK) or Chipotle Mexican Grill (CMG). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Aramark and Chipotle Mexican Grill are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that ARMK likely has seen a stronger improvement to its earnings outlook than CMG has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
ARMK currently has a forward P/E ratio of 22.96, while CMG has a forward P/E of 29.22. We also note that ARMK has a PEG ratio of 1.06. 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. CMG currently has a PEG ratio of 2.13.
Another notable valuation metric for ARMK is its P/B ratio of 4.13. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CMG has a P/B of 17.6.
These are just a few of the metrics contributing to ARMK's Value grade of B and CMG's Value grade of D.
ARMK stands above CMG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ARMK is the superior value option right now.
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Aramark (ARMK): Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).