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BBQ vs. YUMC: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Retail - Restaurants sector might want to consider either BBQ Holdings (BBQ) or Yum China Holdings (YUMC). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, BBQ Holdings is sporting a Zacks Rank of #2 (Buy), while Yum China Holdings has a Zacks Rank of #5 (Strong Sell). This means that BBQ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

BBQ currently has a forward P/E ratio of 9.92, while YUMC has a forward P/E of 52.63. We also note that BBQ has a PEG ratio of 0.71. 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. YUMC currently has a PEG ratio of 6.84.

Another notable valuation metric for BBQ is its P/B ratio of 1.94. 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, YUMC has a P/B of 2.24.

Based on these metrics and many more, BBQ holds a Value grade of A, while YUMC has a Value grade of D.

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


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