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TAST vs. NDLS: Which Stock Is the Better Value Option?


Investors with an interest in Retail – Restaurants stocks have likely encountered both Carrols Restaurant Group (TAST) and Noodles & Co. (NDLS). But which of these two stocks presents investors with the better value opportunity right now? 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 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, Carrols Restaurant Group is sporting a Zacks Rank of #1 (Strong Buy), while Noodles & Co. has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TAST 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 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.

TAST currently has a forward P/E ratio of 43.53, while NDLS has a forward P/E of 393.33. We also note that TAST has a PEG ratio of 2.18. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NDLS currently has a PEG ratio of 44.95.

Another notable valuation metric for TAST is its P/B ratio of 3.23. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NDLS has a P/B of 14.88.

Based on these metrics and many more, TAST holds a Value grade of B, while NDLS has a Value grade of F.

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

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