FWRG or CMG: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Retail - Restaurants sector might want to consider either First Watch Restaurant Group, Inc. (FWRG) or Chipotle Mexican Grill (CMG). 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.

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 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.

Right now, First Watch Restaurant Group, Inc. is sporting a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FWRG is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

FWRG currently has a forward P/E ratio of 44.97, while CMG has a forward P/E of 50.56. We also note that FWRG has a PEG ratio of 1.05. 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. CMG currently has a PEG ratio of 1.95.

Another notable valuation metric for FWRG is its P/B ratio of 2.04. 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, CMG has a P/B of 21.17.

These are just a few of the metrics contributing to FWRG's Value grade of A and CMG's Value grade of D.

FWRG has seen stronger estimate revision activity and sports more attractive valuation metrics than CMG, so it seems like value investors will conclude that FWRG is the superior option right now.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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