RUTH or WEN: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Ruth's Hospitality (RUTH) 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.

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.

Ruth's Hospitality has a Zacks Rank of #2 (Buy), while Wendy's has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that RUTH likely has seen a stronger improvement to its earnings outlook than WEN has recently. But this is just one piece of the puzzle 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.

RUTH currently has a forward P/E ratio of 15.44, while WEN has a forward P/E of 36.14. We also note that RUTH has a PEG ratio of 1.14. 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 3.20.

Another notable valuation metric for RUTH is its P/B ratio of 7.96. 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, WEN has a P/B of 8.26.

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

RUTH stands above WEN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RUTH is the superior value option right now.

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