Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 stocks made the list for top value stocks in the Restaurants & Bars industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Restaurants & Bars Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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5 Undervalued Restaurants & Bars Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Restaurants & Bars industry for Monday, April 08, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Restaurants & Bars industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

BAB Inc’s Value Grade

Value Grade:

BAB, Inc. franchises and licenses bagel and muffin retail units under the BAB, MFM and SweetDuet (SD) trade names. The Company has approximately 63 franchise units and four licensed units in operation in 20 states. The BAB franchised brand consists of units operating as Big Apple Bagels, featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches and other related products. BAB units are concentrated in the Midwest and Western United States. The MFM brand consists of units operating as My Favorite Muffin Gourmet Muffin Bakery (MFM Bakery), featuring a variety of freshly baked muffins and coffees and units operating as My Favorite Muffin Your All Day Bakery Cafe, featuring these products and a variety of specialty bagel sandwiches and related products. The SweetDuet is a branded self-serve frozen yogurt that can be added as an additional brand in a BAB location. Its subsidiaries include BAB Systems, Inc., BAB Operations, Inc. and BAB Investments, Inc.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

BAB Inc has a Value Score of 78, which is considered to be undervalued.

When you look at BAB Inc’s price-to-sales ratio at 1.57 compared to the industry median at 1.05, this company has a higher price relative to revenue compared to its peers. This could make BAB Inc’s stock less attractive for value investors.

BAB Inc’s price-earnings ratio is 11.81 compared to the industry median at 20.24. This means it has a lower share price relative to earnings compared to its peers. This could make BAB Inc more attractive for value investors.

Now, let’s assess BAB Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.4, when compared to the industry median of 10.6, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. BAB Inc’s shareholder yield is higher than its industry median ratio of 2.16%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. BAB Inc’s price-to-book ratio is lower than its industry median ratio of 2.78. This could make BAB Inc more attractive to investors looking for a new addition to their portfolio.

BT Brands Inc’s Value Grade

Value Grade:

BT Brands, Inc. owns and operates approximately 19 restaurants, including eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (BTND); Bagger Dave's Burger Tavern, Inc, a 41.2% owned affiliate that operates six Bagger Dave's restaurants in Michigan, Ohio, and Indiana (Bagger Dave?s); Keegan?s Seafood Grille in Indian Rocks Beach, Florida (Keegan?s); Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (PIE), and Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (VBG). Burger Time restaurants feature a variety of burgers and other quick-serve foods. Its burgers are called Bigger Burgers. Its other entrees include chicken sandwiches, pulled pork sandwiches, and chicken chunks. It offers an array of traditional and signature sides. It also offers other priced food and beverage items. It provides online ordering through its Website with delivery.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

BT Brands Inc has a Value Score of 86, which is considered to be undervalued.

BT Brands Inc’s price-to-book ratio is higher than its peers. This could make BT Brands Inc less attractive for value investors when compared to the industry median at 2.78.

You can read more about BT Brands Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Cracker Barrel Old Country Store, Inc.’s Value Grade

Value Grade:

Cracker Barrel Old Country Store, Inc. is engaged in the operation and development of the Cracker Barrel Old Country Store concept (Cracker Barrel). The Company’s format of its stores consists of a trademarked rustic old country-store design offering a full-service restaurant menu that features home-style country food and a variety of decorative and functional items, such as rocking chairs, holiday and seasonal gifts, toys, apparel, cookware and foods. Its restaurants serve breakfast, lunch and dinner daily and offer dine-in, pick-up and delivery services. Its breakfast items include juices, eggs, pancakes, meats, grits, and a variety of biscuit specialties, such as gravy and biscuits and country ham and biscuits. Its lunch and dinner items include fried and grilled chicken, chicken and dumplings, chicken pot pie, meatloaf, country fried steak, pork chops and others. It operates over 661 Cracker Barrel stores in 45 states and 59 Maple Street Biscuit Company stores in 10 states.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Cracker Barrel Old Country Store, Inc. has a Value Score of 68, which is considered to be undervalued.

Cracker Barrel Old Country Store, Inc.’s price-earnings ratio is 17.1 compared to the industry median at 20.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Cracker Barrel Old Country Store, Inc. more attractive for value investors.

Cracker Barrel Old Country Store, Inc.’s price-to-book ratio is lower than its peers. This could make Cracker Barrel Old Country Store, Inc. more attractive for value investors when compared to the industry median at 2.78.

You can read more about Cracker Barrel Old Country Store, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Dine Brands Global Inc’s Value Grade

Value Grade:

Dine Brands Global, Inc., together with its subsidiaries, owns and franchises the Applebee’s Neighborhood Grill + Bar (Applebee’s) concept in the American full-serve restaurant segment within the casual dining category of the restaurant industry. The Company also owns and franchises the International House of Pancakes (IHOP) concept in the midscale full-service restaurant segment within the family dining category of the restaurant industry and Fuzzy’s Taco Shop (Fuzzy’s) concept in the Mexican limited-service restaurant segment. The Company’s segments include franchise operations, Rental operations, Financing operations and Company restaurant operations. The franchise operations segment consists of approximately 1,642 Applebee’s franchised restaurants; 1,814 IHOP franchised and area licensed restaurants, and 131 Fuzzy's franchised restaurants. The Rental operations segment consists of lease or sublease agreements covering 571 IHOP franchised restaurants.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Dine Brands Global Inc has a Value Score of 92, which is considered to be undervalued.

Dine Brands Global Inc’s price-earnings ratio is 6.9 compared to the industry median at 20.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Dine Brands Global Inc more attractive for value investors.

You can read more about Dine Brands Global Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Noodles & Co’s Value Grade

Value Grade:

Noodles & Company offers lunch and dinner within the fast-casual segment of the restaurant industry. The Company’s core offerings include noodle and pasta dishes, staples of various different cuisines. Its menu includes a variety of cooked-to-order dishes, including noodles and pasta, salads, soups and appetizers. It offers approximately 20 customizable dishes at its restaurants, taken to-go, or delivered to its customers. It operates approximately 470 restaurants in 31 states, which included 380 company locations and 90 franchise locations. Its restaurants are typically between 2,000 and 2,600 square feet and are located in end-cap, in-line or free-standing locations across a variety of suburban, collegiate and urban markets. It is researching a smaller square footage restaurant prototype design. The Company's restaurants are located in Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Maryland, Michigan, Minnesota and others.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Noodles & Co has a Value Score of 81, which is considered to be undervalued.

Noodles & Co’s price-to-book ratio is higher than its peers. This could make Noodles & Co less attractive for value investors when compared to the industry median at 2.78.

You can read more about Noodles & Co’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Restaurants & Bars Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Restaurants & Bars stocks as well as other industrys.

Choosing Which of the 5 Best Restaurants & Bars Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• BAB Inc stock has a Value Grade of B.
• BT Brands Inc stock has a Value Grade of A.
• Cracker Barrel Old Country Store, Inc. stock has a Value Grade of B.
• Dine Brands Global Inc stock has a Value Grade of A.
• Noodles & Co stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 undervalued stocks in the Restaurants & Bars industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Restaurants & Bars Stocks

Want to learn more about Restaurants & Bars stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 5 Undervalued Restaurants & Bars Stocks for Monday, April 08
• 4 Undervalued Restaurants & Bars Stocks for Friday, April 05
• Why Krispy Kreme Inc’s (DNUT) Stock Is Up 7.28%
• Why Kura Sushi USA Inc’s (KRUS) Stock Is Up 5.97%

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