Which of These Beaten-Down Nasdaq Stocks Is a Hotter Buy?

Restaurants have been packed lately as an increasing number of Americans choose to spend money on dining out. U.S. bar and restaurant sales popped 1.1% in August, compared to a mere 0.3% in the retail sales market.

The National Restaurant Association (NRA) expects restaurant and bar sales to top $898 billion this year. With that in mind, let's take a look at two restaurant stocks that have been beaten down over the past year or so.

1. Texas Roadhouse: Laid-back and affordable

Texas Roadhouse (TXRH 2.16%) operates the largest steakhouse chain in the U.S., known most for "hand-cut steaks, fall-off-the-bone ribs, made-from-scratch sides, and fresh-baked bread." The Louisville, Kentucky-based company also owns the Bubba's 33 and Jaggers franchises.

Starting from a single restaurant in 1993, Texas Roadhouse now comprises 680 restaurants across 49 states -- and maintains an international presence in 10 foreign countries, including the United Arab Emirates, China, and Mexico. Every Texas Roadhouse location sports a "Willie's Corner," a shrine adorned with memorabilia inspired by legendary musician Willie Nelson, who was friends with the original founder of the chain, Kent Taylor.

Although the steakhouse chain's low prices and laid-back atmosphere helped earn it the top spot, the COVID-19 pandemic posed a major challenge for Texas Roadhouse -- along with the entire restaurant industry. However, the Texas Roadhouse team was quick to adapt to the new contactless environment, shifting to a curbside and drive-thru format. Some locations even set up drive-thru tents to streamline operations.

Undeterred by the pandemic, by May 2020, Texas Roadhouse was bringing in more than six times the to-go revenue it had been prior to COVID. As the now-late CEO Kent Taylor stated in a May 2020 conference call, "Make no mistake, Texas Roadhouse is open for business."

2. Cracker Barrel: Roadside Americana

Cracker Barrel Old Country Store (CBRL 2.11%) operates a chain of restaurants with adjoining gift shops, found most commonly along U.S. interstate highways. Headquartered in Lebanon, Tennessee, the company runs more than 660 locations across 45 states.

Known for being affordable and welcoming, Cracker Barrel restaurants serve homestyle comfort food "reminiscent of America's country heritage," including meatloaf, southern fried chicken, and signature biscuits. Each location has its own adjacent country retail store, which offers unique candy, gifts, and American novelties to make road trips more enjoyable.

Image source: Cracker Barrel.

Like other restaurants, Cracker Barrel was hit hard when COVID restrictions shuttered eateries for dine-in service. To help offset lost dine-in business, the company began opening ghost kitchens -- delivery-only restaurants that cook and package Cracker Barrel classics for delivery. Partnering with other restaurants and businesses and utilizing their kitchens, Cracker Barrel opened the first of its "Cracker Barrel Kitchens" in 2021.

Although tough times precipitated these changes for Cracker Barrel, its customers can now order comfort favorites on DoorDash, GrubHub, and UberEats. And to appease its growing number of millennial customers, Cracker Barrel now allows guests to pay from their phones using a QR code -- and has plans to add Apple Pay and Google Pay options soon.

Which is a better buy?

While the entire restaurant industry continues to face higher expenses, staffing challenges, and inflated labor costs, there is cautious optimism surrounding the business of dining out. To determine which company is a better buy at the moment, let's look at market capitalization, price-to-earnings (P/E) ratios, and dividend yields.

With a lower P/E ratio and a higher dividend yield, Cracker Barrel currently shapes up as the better buy-and-hold. However, both of these resilient restaurant chains are positioned to recover as more hungry Americans get back out there.