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 Monday, June 03, 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.

Arcos Dorados Holdings Inc’s Value Grade

Value Grade:

Arcos Dorados Holdings Inc. is a McDonald's franchisee. The Company operates or franchises over 2,140 McDonald's-branded restaurants. It divides its operations into four geographical divisions: Brazil; the Caribbean division, consisting of Aruba, Colombia, Curacao, French Guiana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the United States Virgin Islands of Saint Croix and Saint Thomas, and Venezuela; the North Latin America division (NOLAD), consisting of Costa Rica, Mexico and Panama, and the South Latin America division (SLAD), consisting of Argentina, Chile, Ecuador, Peru and Uruguay. Its menus feature over three tiers of products: entry-level options, such as its Big Pleasures, Small Prices offerings and Almuerzos Colombianos (Colombian Lunches) in Colombia; core menu options, such as the Big Mac, Happy Meal and Quarter Pounder, and premium options, such as Big Tasty or Angus premium hamburgers and chicken sandwiches and low-calorie or low-sodium products.

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.

Arcos Dorados Holdings Inc has a Value Score of 72, which is considered to be undervalued.

When you look at Arcos Dorados Holdings Inc’s price-to-sales ratio at 0.46 compared to the industry median at 0.93, this company has a lower price relative to revenue compared to its peers. This could make Arcos Dorados Holdings Inc’s stock more attractive for value investors.

Arcos Dorados Holdings Inc’s price-earnings ratio is 11.81 compared to the industry median at 20.50. This means it has a lower share price relative to earnings compared to its peers. This could make Arcos Dorados Holdings Inc more attractive for value investors.

Now, let’s assess Arcos Dorados Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.1, when compared to the industry median of 10.1, 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. Arcos Dorados Holdings Inc’s shareholder yield is higher than its industry median ratio of 1.82%. 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. Arcos Dorados Holdings Inc’s price-to-book ratio is higher than its industry median ratio of 2.92. This could make Arcos Dorados Holdings Inc less attractive to investors looking for a new addition to their portfolio.

Flanigan's Enterprises Inc’s Value Grade

Value Grade:

Flanigan's Enterprises, Inc. owns and operates restaurants and retail package liquor stores. The Company operates through two segments: package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. The Company operates 30 units, consisting of restaurants, package liquor stores, a combination restaurant/package liquor stores, and a sports bar, which the Company either owns or has operational control over and partial ownership in; and franchises an additional five units, consisting of two restaurants, one of which it operates and three combination restaurant/package liquor stores. The Company operates its package liquor stores and restaurants under the service marks, Big Daddy's Liquors, Big Daddy’s Wine & Liquors, Flanigan’s Seafood Bar and Grill, and Flanigan’s. The Company also operates its sports bar under the service mark, Brendan’s Sports Pub.

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.

Flanigan's Enterprises Inc has a Value Score of 89, which is considered to be undervalued.

Flanigan's Enterprises Inc’s price-earnings ratio is 14.5 compared to the industry median at 20.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Flanigan's Enterprises Inc more attractive for value investors.

Flanigan's Enterprises Inc’s price-to-book ratio is higher than its peers. This could make Flanigan's Enterprises Inc less attractive for value investors when compared to the industry median at 2.92.

You can read more about Flanigan's Enterprises 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.

Good Times Restaurants Inc.’s Value Grade

Value Grade:

Good Times Restaurants Inc. is an operator of Bad Daddy’s Burger Bar and Good Times Burgers & Frozen Custard. The Company owns, operates and licenses 41 Bad Daddy’s Burger Bar restaurants through its wholly owned subsidiaries. Bad Daddy’s Burger Bar is a full-service small box restaurant concept featuring a chef-driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of local and craft beers in a high-energy atmosphere that appeals to a broad consumer base. In addition, through its wholly owned subsidiaries, Good Times Restaurants Inc. owns, operates and franchises 31 Good Times Burgers & Frozen Custard restaurants primarily in Colorado. Good Times is a regional quick-service concept featuring 100% all-natural burgers and chicken sandwiches, signature wild fries, green chili breakfast burritos and fresh frozen custard desserts. Its subsidiaries include Good Times Drive Thru Inc. and Bad Daddy’s International, LLC.

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.

Good Times Restaurants Inc. has a Value Score of 74, which is considered to be undervalued.

Good Times Restaurants Inc.’s price-earnings ratio is 44.1 compared to the industry median at 20.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Good Times Restaurants Inc. less attractive for value investors.

Good Times Restaurants Inc.’s price-to-book ratio is higher than its peers. This could make Good Times Restaurants Inc. less attractive for value investors when compared to the industry median at 2.92.

You can read more about Good Times Restaurants 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 78, which is considered to be undervalued.

Noodles & Co’s price-to-book ratio is lower than its peers. This could make Noodles & Co more attractive for value investors when compared to the industry median at 2.92.

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 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.

• Arcos Dorados Holdings Inc stock has a Value Grade of B.
• Flanigan's Enterprises Inc stock has a Value Grade of A.
• Good Times Restaurants Inc. stock has a Value Grade of B.
• Noodles & Co 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 Monday, June 03
• Why Dave & Buster's Entertainment Inc’s (PLAY) Stock Is Up 5.06%
• Why Dine Brands Global Inc’s (DIN) Stock Is Up 4.20%
• Why Jack in the Box Inc.’s (JACK) Stock Is Up 4.32%

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