Investors with an interest in Retail - Restaurants stocks have likely encountered both Ruth's Hospitality (RUTH) and Starbucks (SBUX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Ruth's Hospitality has a Zacks Rank of #2 (Buy), while Starbucks has a Zacks Rank of #3 (Hold) right now. This means that RUTH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
RUTH currently has a forward P/E ratio of 21.48, while SBUX has a forward P/E of 22.82. We also note that RUTH has a PEG ratio of 1.51. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SBUX currently has a PEG ratio of 1.63.
Another notable valuation metric for RUTH is its P/B ratio of 10.52. 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, SBUX has a P/B of 18.61.
Based on these metrics and many more, RUTH holds a Value grade of B, while SBUX has a Value grade of C.
RUTH sticks out from SBUX in both our Zacks Rank and Style Scores models, so value investors will likely feel that RUTH is the better option right now.
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Ruth's Hospitality Group, Inc. (RUTH) : Free Stock Analysis Report
Starbucks Corporation (SBUX) : Free Stock Analysis Report
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