CMPGY or SHAK: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Retail - Restaurants sector have probably already heard of Compass Group PLC (CMPGY) and Shake Shack (SHAK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Both Compass Group PLC and Shake Shack have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CMPGY currently has a forward P/E ratio of 25, while SHAK has a forward P/E of 161.75. We also note that CMPGY has a PEG ratio of 2.05. 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. SHAK currently has a PEG ratio of 3.01.
Another notable valuation metric for CMPGY is its P/B ratio of 8.88. 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, SHAK has a P/B of 11.65.
Based on these metrics and many more, CMPGY holds a Value grade of B, while SHAK has a Value grade of F.
Both CMPGY and SHAK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CMPGY is the superior value option right now.
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