Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Restaurants & Bars Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Restaurants & Bars industry for Thursday, May 09, 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.

Ark Restaurants Corp’s Value Grade

Value Grade:

Ark Restaurants Corp. owns and operates approximately 17 restaurants and bars, 16 fast food concepts and catering operations. It operates four restaurant and bar facilities are located in New York City, one is located in Washington, D.C., five are located in Las Vegas, Nevada, one is located in Atlantic City, New Jersey, four are located on the east coast of Florida and two are located on the Gulf Coast of Alabama. The Las Vegas operations include four restaurants within the New York-New York Hotel and Casino Resort and one restaurant within the Planet Hollywood Resort and Casino. In Atlantic City, New Jersey, the Company operates a restaurant in the Tropicana Hotel and Casino. The Florida operations include The Rustic Inn in Dania Beach, Shuckers in Jensen Beach, JB's on the Beach in Deerfield Beach, The Blue Moon Fish Company in Fort Lauderdale and the operation of four fast food facilities in Tampa and six fast food facilities in Hollywood, each at a Hard Rock Hotel and Casino.

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.

Ark Restaurants Corp has a Value Score of 95, which is considered to be undervalued.

When you look at Ark Restaurants Corp’s price-to-sales ratio at 0.26 compared to the industry median at 0.92, this company has a lower price relative to revenue compared to its peers. This could make Ark Restaurants Corp’s stock more attractive for value investors.

Now, let’s assess Ark Restaurants Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.1, 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. Ark Restaurants Corp’s shareholder yield is higher than its industry median ratio of 1.71%. 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. Ark Restaurants Corp’s price-to-book ratio is lower than its industry median ratio of 2.65. This could make Ark Restaurants Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ark Restaurants Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ark Restaurants Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 32.44. This could make Ark Restaurants Corp more attractive because the lower P/FCF ratio indicates that Ark Restaurants Corp is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

BT Brands Inc’s Value Grade

Value Grade:

BT Brands, Inc. owns and operates approximately 17 restaurants, including Seven 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 partially owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (BDVB); Keegan’s Seafood Grille in Indian Rocks Beach, Florida; Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts, and Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida. Its Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Its Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. The Company’s Dairy Queen restaurant offers a proscribed menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages.

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 87, 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 2.65.

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.

Jack in the Box Inc.’s Value Grade

Value Grade:

Jack in the Box Inc. is a restaurant company. The Company is engaged in developing, operating, and franchising quick-service restaurants (QSR). The Company operates and franchises Jack in the Box, hamburger chains with approximately 2,200 restaurants across 22 states and Del Taco a QSR chain by units in the United States with approximately 600 restaurants across 16 states. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers, such as Jumbo Jack burgers, and product lines, such as Buttery Jack burgers. The Company also offers breakfast sandwiches with freshly cracked eggs, tacos, curly fries, egg rolls, specialty sandwiches and real ice cream shakes, among other items. The Company allows its guests to customize meals to their tastes and order any product on the menu when they want it, including breakfast at night, or burgers and chicken in the morning. It also involves the concept of drive-thru 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.

Jack in the Box Inc. has a Value Score of 64, which is considered to be undervalued.

Jack in the Box Inc.’s price-earnings ratio is 9.7 compared to the industry median at 18.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Jack in the Box Inc. more attractive for value investors.

You can read more about Jack in the Box 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.

WB Burgers Asia Inc’s Value Grade

Value Grade:

WB Burgers Asia Inc, formerly Business Solutions Plus Inc, is a company mainly engaged in the restaurant businesses. The Company is mainly engaged in the operation of Wayback Burgers restaurants through its subsidiary, WB Burgers Japan Co., Ltd. The Company offers an array of quick bites, including, but not limited to, traditional hamburgers, fries, shakes, and other alternatives. The Company is also engaged in the operation of a ghost kitchen named NEXT Restaurant, located in Omotesando.

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.

WB Burgers Asia Inc has a Value Score of 65, which is considered to be undervalued.

WB Burgers Asia Inc’s price-to-book ratio is higher than its peers. This could make WB Burgers Asia Inc less attractive for value investors when compared to the industry median at 2.65.

You can read more about WB Burgers Asia 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.

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 4 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.

• Ark Restaurants Corp stock has a Value Grade of A.
• BT Brands Inc stock has a Value Grade of A.
• Jack in the Box Inc. stock has a Value Grade of B.
• WB Burgers Asia Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Restaurants & Bars Stocks for Thursday, May 09
• 4 Undervalued Restaurants & Bars Stocks for Wednesday, May 08
• What You Need to Know About Dine Brands Global Inc's Q1 Earnings
• Why Dutch Bros Inc’s (BROS) Stock Is Up 11.79%

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