YUMC vs. BROS: Which Stock Should Value Investors Buy Now?
Investors with an interest in Retail - Restaurants stocks have likely encountered both Yum China Holdings (YUMC) and Dutch Bros (BROS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Yum China Holdings and Dutch Bros are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that YUMC has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
YUMC currently has a forward P/E ratio of 16.37, while BROS has a forward P/E of 88.44. We also note that YUMC has a PEG ratio of 1.49. 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. BROS currently has a PEG ratio of 2.33.
Another notable valuation metric for YUMC is its P/B ratio of 2.19. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, BROS has a P/B of 7.31.
Based on these metrics and many more, YUMC holds a Value grade of A, while BROS has a Value grade of F.
YUMC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that YUMC is likely the superior value option right now.
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Yum China (YUMC) : Free Stock Analysis Report
Dutch Bros Inc. (BROS) : Free Stock Analysis Report