Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Ruth's Hospitality Group stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Ruth's Hospitality has a trailing twelve months PE ratio of 23.4, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25. If we focus on the long-term PE trend, its current PE level puts it above its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 30.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Ruth's Hospitality has a forward PE ratio (price relative to this year’s earnings) of just 18.9, so it is fair to say that a slightly more value-oriented path may be ahead for RUTH stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Ruth's Hospitality has a P/S ratio of about 1.8. This is a lower than the S&P 500 average, which comes in at 5.2 right now. We can see in the chart below, this is slightly above the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Ruth's Hospitality currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Ruth's Hospitality a solid choice for value investors, and other key metrics makes this pretty clear too.
For example, the PEG ratio (another great indicator of value) comes in at 1.26, (which is somewhat better than the industry average of 2.09). Clearly, Ruth's Hospitality is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Ruth's Hospitality might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of C. This gives RUTH a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. While the current-quarter estimate has seen no movement, and the current year estimate has seen one upward and none downward movements over the past two months.
This has had a mixed effect on the consensus estimate. While the current-quarter consensus has remained unchanged in the past two months, the current year estimate has improved 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Such mixed analyst sentiments is the reason why the stock has a Zacks Rank #3 (Hold) and it is the reason why we are looking for in line performance from the company in the near term.
Bottom Line
Ruth's Hospitality is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a Zacks Rank #3 and a sluggish industry rank (bottom 14%), it is hard to get too excited about this company overall. Also, over the past year, the broader industry has clearly underperformed the market at large, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Image: Bigstock
Should Value Investors Pick Ruth's Hospitality (RUTH) Now?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Ruth's Hospitality Group stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Ruth's Hospitality has a trailing twelve months PE ratio of 23.4, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25. If we focus on the long-term PE trend, its current PE level puts it above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 30.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Ruth's Hospitality has a forward PE ratio (price relative to this year’s earnings) of just 18.9, so it is fair to say that a slightly more value-oriented path may be ahead for RUTH stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Ruth's Hospitality has a P/S ratio of about 1.8. This is a lower than the S&P 500 average, which comes in at 5.2 right now. We can see in the chart below, this is slightly above the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Ruth's Hospitality currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Ruth's Hospitality a solid choice for value investors, and other key metrics makes this pretty clear too.
For example, the PEG ratio (another great indicator of value) comes in at 1.26, (which is somewhat better than the industry average of 2.09). Clearly, Ruth's Hospitality is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Ruth's Hospitality might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of C. This gives RUTH a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. While the current-quarter estimate has seen no movement, and the current year estimate has seen one upward and none downward movements over the past two months.
This has had a mixed effect on the consensus estimate. While the current-quarter consensus has remained unchanged in the past two months, the current year estimate has improved 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Ruth's Hospitality Group, Inc. Price and Consensus
Ruth's Hospitality Group, Inc. price-consensus-chart | Ruth's Hospitality Group, Inc. Quote
Such mixed analyst sentiments is the reason why the stock has a Zacks Rank #3 (Hold) and it is the reason why we are looking for in line performance from the company in the near term.
Bottom Line
Ruth's Hospitality is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a Zacks Rank #3 and a sluggish industry rank (bottom 14%), it is hard to get too excited about this company overall. Also, over the past year, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.