Chipotle Mexican Grill (NYSE: CMG) and Kona Grill (NASDAQ:KONA) are both retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, valuation, profitabiliy, analyst recommendations, dividends, earnings and institutional ownership.

Volatility & Risk

Chipotle Mexican Grill has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500. Comparatively, Kona Grill has a beta of 0.48, meaning that its stock price is 52% less volatile than the S&P 500.

Profitability

This table compares Chipotle Mexican Grill and Kona Grill’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Chipotle Mexican Grill 2.31% 7.72% 5.36%
Kona Grill -13.31% -30.92% -9.76%

Valuation & Earnings

This table compares Chipotle Mexican Grill and Kona Grill’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Chipotle Mexican Grill $4.14 billion 3.19 $330.51 million $3.29 140.08
Kona Grill $175.47 million 0.22 $4.96 million ($2.23) -1.70

Chipotle Mexican Grill has higher revenue and earnings than Kona Grill. Kona Grill is trading at a lower price-to-earnings ratio than Chipotle Mexican Grill, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for Chipotle Mexican Grill and Kona Grill, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Chipotle Mexican Grill 7 15 12 0 2.15
Kona Grill 0 1 4 0 2.80

Chipotle Mexican Grill presently has a consensus price target of $448.83, indicating a potential downside of 2.61%. Kona Grill has a consensus price target of $12.75, indicating a potential upside of 235.53%. Given Kona Grill’s stronger consensus rating and higher probable upside, analysts clearly believe Kona Grill is more favorable than Chipotle Mexican Grill.

Insider and Institutional Ownership

95.6% of Chipotle Mexican Grill shares are owned by institutional investors. Comparatively, 64.1% of Kona Grill shares are owned by institutional investors. 2.0% of Chipotle Mexican Grill shares are owned by insiders. Comparatively, 29.2% of Kona Grill shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Chipotle Mexican Grill beats Kona Grill on 10 of the 13 factors compared between the two stocks.

Chipotle Mexican Grill Company Profile

Chipotle Mexican Grill, Inc. (Chipotle), together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The Company’s Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company managed its operations and restaurants based on 11 regions. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts. As of December 31, 2016, 29 of its restaurants were located outside of the United States, with 17 in Canada, six in the United Kingdom, five in France and one in Frankfurt, Germany. The Company sells gift cards, which do not have an expiration date. The Company categorizes its restaurants as end-caps (at the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other.

Kona Grill Company Profile

Kona Grill, Inc. owns and operates upscale casual dining restaurants under the name Kona Grill. The Company owns and operates approximately 40 restaurants in 20 states throughout the United States and Puerto Rico. Its high-volume upscale casual restaurants feature a global menu of contemporary American favorites and sushi. Its menu items are prepared from scratch at each restaurant location and incorporate over 40 signature sauces and dressings. It also offers a full service bar offering a range assortment of wines, specialty cocktails and beers. Its restaurants seat an average of approximately 290 customers and comprise multiple dining areas. Its dining area, full-service bar, indoor/outdoor patio and sushi bar provide a choice of atmospheres and a range of environments. It locates its restaurants in various areas, such as retail centers, shopping malls, urban entertainment districts and lifestyle centers that are situated near commercial office space and residential housing.

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