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DRI or BROS: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Retail - Restaurants sector might want to consider either Darden Restaurants (DRI - Free Report) or Dutch Bros (BROS - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Darden Restaurants has a Zacks Rank of #2 (Buy), while Dutch Bros has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DRI has an improving earnings 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.
DRI currently has a forward P/E ratio of 19.60, while BROS has a forward P/E of 103.01. We also note that DRI has a PEG ratio of 2.06. 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. BROS currently has a PEG ratio of 2.93.
Another notable valuation metric for DRI is its P/B ratio of 10.55. 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, BROS has a P/B of 12.30.
These metrics, and several others, help DRI earn a Value grade of B, while BROS has been given a Value grade of F.
DRI sticks out from BROS in both our Zacks Rank and Style Scores models, so value investors will likely feel that DRI is the better option right now.