Luby’s (NYSE: LUB) and DineEquity (NYSE:DIN) are both small-cap retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, earnings, profitabiliy and valuation.

Valuation and Earnings

This table compares Luby’s and DineEquity’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Luby’s $387.17 million 0.22 $13.97 million ($0.92) -3.15
DineEquity $626.62 million 1.25 $241.22 million $4.75 9.16

DineEquity has higher revenue and earnings than Luby’s. Luby’s is trading at a lower price-to-earnings ratio than DineEquity, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Luby’s has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, DineEquity has a beta of 0.41, suggesting that its share price is 59% less volatile than the S&P 500.

Dividends

DineEquity pays an annual dividend of $3.88 per share and has a dividend yield of 8.9%. Luby’s does not pay a dividend. DineEquity pays out 81.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Luby’s has raised its dividend for 2 consecutive years.

Insider & Institutional Ownership

47.0% of Luby’s shares are owned by institutional investors. Comparatively, 88.3% of DineEquity shares are owned by institutional investors. 35.2% of Luby’s shares are owned by insiders. Comparatively, 2.2% of DineEquity shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and price targets for Luby’s and DineEquity, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Luby’s 0 0 0 0 N/A
DineEquity 0 3 4 0 2.57

DineEquity has a consensus target price of $69.00, suggesting a potential upside of 58.66%. Given DineEquity’s higher possible upside, analysts clearly believe DineEquity is more favorable than Luby’s.

Profitability

This table compares Luby’s and DineEquity’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Luby’s -6.96% -4.97% -3.16%
DineEquity 13.85% 40.48% 4.59%

Summary

DineEquity beats Luby’s on 11 of the 15 factors compared between the two stocks.

Luby’s Company Profile

Luby’s, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

DineEquity Company Profile

DineEquity, Inc., through its subsidiaries, owns and franchises the Applebee’s Neighborhood Grill & Bar (Applebee’s) concept in the bar and grill segment within the casual dining category of the restaurant industry, and owns, franchises and operates the International House of Pancakes (IHOP) concept in the family dining category of the restaurant industry. It operates through four segments: Franchise operations, Rental operations, Company restaurant operations and Financing operations. As of December 31, 2016, it had 3,749 restaurants. Applebee’s menu features a selection of grill and bar fare, such as appetizers, bar snacks, burgers, classic entrees and lighter fare, as well as cocktails, beers and desserts. As of December 31, 2016, IHOP franchise and area license restaurants were located in all 50 states within the United States, in the District of Columbia, in three United States territories and in 10 countries outside of the United States.

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