The restaurant industry has evolved dramatically over the past 10 or 20 years, as customers want the ultimate combination of convenience, speed, and high-quality food and beverages. Chipotle Mexican Grill (NYSE:CMG) helped revolutionize the industry by offering a limited selection of high-quality food offerings, while Starbucks (NASDAQ:SBUX) brought the coffeehouse culture to the U.S. and then transplanted it around the world. Yet competition in the restaurant space is fierce, and challenges abound for both companies. With the two stocks having both lost ground recently, investors want to know which one is the smarter bargain buy buy right now. Let's take a closer look at Chipotle and Starbucks, comparing them on a number of metrics to see which one looks more attractive right now.

Image source: Starbucks.

Valuation and stock performance

Starbucks and Chipotle have both seen their share prices fall over the past year. Since Sept. 2015, Starbucks has lost 6% of its value. Chipotle has suffered even larger losses, falling 45% over the same period.

Often, when a stock falls sharply, it offers an attractive valuation to would-be investors. Yet when you look at simple valuation measures based on earnings, Chipotle still doesn't compare favorably even after its share-price decline. Focusing on trailing earnings, Chipotle currently carries an earnings multiple of 57. That's almost double the 30 times trailing earnings that Starbucks has, and although that's hardly cheap, it reflects growth expectations for the coffee giant.

The situation only gets worse when you look at near-term future expectations for earnings to grow. On a forward-looking basis, Starbucks' earnings multiple falls to 25. Yet Chipotle expects to see earnings dwindle to nearly nothing in the immediate future, and that makes its forward multiple so high as to be meaningless. Based on valuation, Starbucks has an edge despite Chipotle's larger share-price drop.

Dividends and return of capital

From a dividend perspective, there's only one choice between these two companies, because only Starbucks pays a dividend. Investors receive $0.20 per share each quarter from the coffee chain, putting its yield at a relatively lackluster 1.5%. Still, for income investors, that's better than nothing, and Chipotle has paid exactly zero dividends throughout its history.

That said, if you look more broadly at various ways to return capital to shareholders, Chipotle becomes more competitive. Both companies have done a good job of implementing stock buybacks, with Starbucks having stepped up its repurchases to more than $2.1 billion over the past 12 months. Yet Chipotle has been even more aggressive, spending more than $1 billion to buy back stock over the past year, and on a percentage basis, the buyback represents a much higher portion of its total outstanding shares.

For those who specifically want dividends, Starbucks is the better choice. However, those who appreciate buybacks as well can get good results with either company.

Growth prospects and risk

The restaurant industry faces the challenge of sustaining its past impressive growth. For Chipotle, that has been impossible recently, because concerns related to multiple instances of foodborne illness tied to its restaurant locations have resulted in monumental declines in comparable-restaurant sales and profit. Chipotle posted its first-ever quarterly loss earlier this year, and even though it eked out a small profit in its most recent quarter, the fast-casual giant is still struggling to rebuild confidence among its core customer base. The risk is that if customers don't give Chipotle the benefit of the doubt, they might never return to the burrito maker, and that could lead to a permanent disappearance of its high-growth prospects.

By contrast, Starbucks hasn't had to deal with major disruptive events, but its pace of growth hasn't been as fast as many investors would prefer to see. In its most recent quarter, comparable-store sales globally rose just 4%, and although that was still a solid performance compared with many of Starbucks' peers, it still represented a slowdown compared to the past. However, CEO Howard Schultz argued that Starbucks' efforts to change its loyalty program and its annual Frappuccino happy hour promotion partially interfered with each other, diluting what he had expected to be a more complementary set of initiatives. With growth prospects across the globe, Starbucks has a clearer path to future success than Chipotle right now.

For now, Starbucks looks like the better buy between the two stocks, with its valuation and growth potential looking superior to Chipotle. Until the latter demonstrates that it can mount a full recovery from its recent woes, its shares will have a lot of risk to go with their potential reward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.