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 Wednesday, August 21, 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 81, which is considered to be undervalued.

When you look at Ark Restaurants Corp’s price-to-sales ratio at 0.24 compared to the industry median at 0.95, 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 5.5, when compared to the industry median of 9.0, 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. Ark Restaurants Corp’s shareholder yield is higher than its industry median ratio of 1.79%. 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 2.83. 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 higher than its industry median ratio of 48.78. This could make Ark Restaurants Corp less attractive because the higher 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 82, 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 2.83.

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 19.5 compared to the industry median at 23.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Brinker International, Inc. more 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.

Red Robin Gourmet Burgers Inc’s Value Grade

Value Grade:

Red Robin Gourmet Burgers, Inc., together with its subsidiaries, primarily operates, franchises, and develops casual dining restaurants in North America. The Company's menu features its signature product, a line of Gourmet Burgers with layers of fresh ingredients and fresh ground beef. It also offers burgers made with other proteins including chicken breasts (grilled or fried), turkey patties, as well as a proprietary vegetarian patty and the Impossible plant-based burger patty. The Company offer a selection of buns, including gluten free, sesame, brioche, and lettuce wraps, with a variety of toppings, including house-made sauces, crispy onion straws, sauteed mushrooms, several cheese choices, and a fried egg. It serves an array of other mainstream items, such as Donatos pizza, wings, salads, other entrees, and desserts. The Company’s beverage categories include alcoholic and non-alcoholic specialty drinks, cocktails, wine, and a variety of national and craft beers.

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.

Red Robin Gourmet Burgers Inc has a Value Score of 98, which is considered to be undervalued.

You can read more about Red Robin Gourmet Burgers 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.
• Brinker International, Inc. stock has a Value Grade of B.
• Red Robin Gourmet Burgers Inc stock has a Value Grade of A.

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 Wednesday, August 21
• Why Sweetgreen Inc’s (SG) Stock Is Down 4.85%
• 4 Undervalued Restaurants & Bars Stocks for Monday, August 19
• Why BJ's Restaurants Inc’s (BJRI) Stock Is Up 4.76%

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