BLMN vs. SHAK: Which Stock Is the Better Value Option?

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Bloomin' Brands (BLMN) or Shake Shack (SHAK). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Bloomin' Brands has a Zacks Rank of #1 (Strong Buy), while Shake Shack has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that BLMN likely has seen a stronger improvement to its earnings outlook than SHAK has recently. 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 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.

BLMN currently has a forward P/E ratio of 8.87, while SHAK has a forward P/E of 55.10. We also note that BLMN has a PEG ratio of 2.23. 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. SHAK currently has a PEG ratio of 6.82.

Another notable valuation metric for BLMN is its P/B ratio of 1.71. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHAK has a P/B of 4.62.

These metrics, and several others, help BLMN earn a Value grade of A, while SHAK has been given a Value grade of D.

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

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This article originally published on Zacks Investment Research (zacks.com).

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