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DRI vs. WEN: Which Stock Is the Better Value Option?

Zacks Equity Research
·2-min read

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Darden Restaurants (DRI) or Wendy's (WEN). 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.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Darden Restaurants 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 DRI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

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The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

DRI currently has a forward P/E ratio of 19.15, while WEN has a forward P/E of 27.46. We also note that DRI has a PEG ratio of 1.91. 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. WEN currently has a PEG ratio of 1.96.

Another notable valuation metric for DRI is its P/B ratio of 6.87. 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 8.70.

These metrics, and several others, help DRI earn a Value grade of B, while WEN has been given a Value grade of C.

DRI has seen stronger estimate revision activity and sports more attractive valuation metrics than WEN, so it seems like value investors will conclude that DRI is the superior option right now.


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Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
 
The Wendy's Company (WEN) : Free Stock Analysis Report
 
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Zacks Investment Research