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 Thursday, July 18, 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 65, which is considered to be undervalued.

When you look at BAB Inc’s price-to-sales ratio at 1.71 compared to the industry median at 0.91, 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 11.23 compared to the industry median at 19.40. 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 5.2, when compared to the industry median of 10.0, 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 1.80%. 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 2.82. This could make BAB Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at BAB Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. BAB Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 41.38. This could make BAB Inc fairly attractive because the higher P/FCF ratio indicates that BAB Inc 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 80, 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 2.82.

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.

Brinker International, Inc.’s Value Grade

Value Grade:

Brinker International, Inc. is a casual dining restaurant company. The Company owns, develops, operates and franchises the Chilis Grill & Bar (Chilis) and Maggianos Little Italy (Maggianos) restaurant brands, as well as a virtual brand, Its Just Wings. The Company operates through two segments: Chili’s and Maggiano’s. The Chili’s segment includes the Company-owned Chili’s restaurants, which are principally located in the United States, within the full-service casual dining segment of the industry. The Chili’s segment also has Company-owned restaurants in Canada, and franchised locations in the United States, other countries and two United States territories. The Maggiano’s segment includes the Company-owned Maggiano’s restaurants in the United States as well as its domestic franchise business. The Company owns, operates or franchises approximately 1,600 restaurants in approximately 29 countries and two United States territories.

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.

Brinker International, Inc. has a Value Score of 61, which is considered to be undervalued.

Brinker International, Inc.’s price-earnings ratio is 19.8 compared to the industry median at 19.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Brinker International, Inc. less attractive for value investors.

You can read more about Brinker International, 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.

Dave & Buster's Entertainment Inc’s Value Grade

Value Grade:

Dave & Buster's Entertainment, Inc. is an owner and operator of entertainment and dining venues. The Company owns and operates about 223 venues in North America that offer entertainment and dining experiences to guests through two distinct brands: Dave & Buster’s and Main Event. The Company has about 164 Dave & Buster's branded stores in 42 states, Puerto Rico, and Canada and offers guests the opportunity to Eat Drink Play and Watch, all in one location. Each store offers a full menu of entrees and appetizers, a complete selection of alcoholic and non-alcoholic beverages, and an assortment of entertainment attractions centered around playing games and watching live sports and other televised events. It also operates about 59 Main Event branded stores in 20 states across the country, and offers bowling, laser tag, hundreds of arcade games, and virtual reality. Each of its locations also offers full bar service, including a variety of beers, hand-crafted cocktails, and premium spirits.

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.

Dave & Buster's Entertainment Inc has a Value Score of 71, which is considered to be undervalued.

Dave & Buster's Entertainment Inc’s price-earnings ratio is 16.9 compared to the industry median at 19.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Dave & Buster's Entertainment Inc more attractive for value investors.

Dave & Buster's Entertainment Inc’s price-to-book ratio is lower than its peers. This could make Dave & Buster's Entertainment Inc more attractive for value investors when compared to the industry median at 2.82.

You can read more about Dave & Buster's Entertainment 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.

One Group Hospitality Inc’s Value Grade

Value Grade:

The ONE Group Hospitality, Inc. is an international restaurant company, which develops and operates upscale and polished casual, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos, and other high-end venues. Its primary restaurant brands and operations are STK, an American steakhouse concept with restaurants in various metropolitan cities in the United States, Europe, and the Middle East, featuring steaks, seafood, and specialty cocktails; Benihana, an operator of highly differentiated experiential brands that owns the national teppanyaki brand in the United States; Kona Grill, a polished casual, bar-centric grill concept with restaurants in the United States; RA Sushi, a Japanese cuisine concept, and ONE Hospitality, its food and beverage hospitality services business that develops, manages, and operates restaurants and turnkey food and beverage services within high-end hotels and casinos operating in the United States and Europe.

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.

One Group Hospitality Inc has a Value Score of 66, which is considered to be undervalued.

One Group Hospitality Inc’s price-to-book ratio is higher than its peers. This could make One Group Hospitality Inc less attractive for value investors when compared to the industry median at 2.82.

You can read more about One Group Hospitality 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 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 B.
• Brinker International, Inc. stock has a Value Grade of B.
• Dave & Buster's Entertainment Inc stock has a Value Grade of B.
• One Group Hospitality Inc stock has a Value Grade of B.

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 Thursday, July 18
• 4 Undervalued Restaurants & Bars Stocks for Wednesday, July 17
• Why CAVA Group Inc’s (CAVA) Stock Is Down 6.88%
• Why Chipotle Mexican Grill, Inc.’s (CMG) Stock Is Down 4.24%

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