Sonic Corp. (NASDAQ: SONC) and Noodles & (NASDAQ:NDLS) are both small-cap retail/wholesale companies, but which is the better stock? We will compare the two companies based on the strength of their analyst recommendations, risk, profitabiliy, valuation, dividends, institutional ownership and earnings.

Profitability

This table compares Sonic Corp. and Noodles &’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sonic Corp. 13.23% -44.21% 9.71%
Noodles & -19.61% -10.55% -2.49%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Sonic Corp. and Noodles &, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic Corp. 2 7 2 0 2.00
Noodles & 2 6 1 0 1.89

Sonic Corp. currently has a consensus target price of $27.00, indicating a potential upside of 10.16%. Noodles & has a consensus target price of $5.69, indicating a potential upside of 40.43%. Given Noodles &’s higher possible upside, analysts clearly believe Noodles & is more favorable than Sonic Corp..

Dividends

Sonic Corp. pays an annual dividend of $0.56 per share and has a dividend yield of 2.3%. Noodles & does not pay a dividend. Sonic Corp. pays out 37.3% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Sonic Corp. and Noodles &’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sonic Corp. $515.82 million 1.99 $158.68 million $1.50 16.34
Noodles & $490.20 million 0.33 $11.41 million ($3.48) -1.16

Sonic Corp. has higher revenue and earnings than Noodles &. Noodles & is trading at a lower price-to-earnings ratio than Sonic Corp., indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

97.5% of Sonic Corp. shares are held by institutional investors. Comparatively, 54.9% of Noodles & shares are held by institutional investors. 6.2% of Sonic Corp. shares are held by company insiders. Comparatively, 52.7% of Noodles & shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility & Risk

Sonic Corp. has a beta of 1.77, meaning that its share price is 77% more volatile than the S&P 500. Comparatively, Noodles & has a beta of -0.57, meaning that its share price is 157% less volatile than the S&P 500.

Summary

Sonic Corp. beats Noodles & on 11 of the 15 factors compared between the two stocks.

Sonic Corp. Company Profile

Sonic Corp. operates and franchises the chain of drive-thru restaurants (Sonic Drive-Ins) in the United States. As of August 31, 2016, 3,557 Sonic Drive-Ins were in operation from coast to coast in 45 states, consisting of 345 Company drive-thrus and 3,212 franchise drive-thrus. As of August 31, 2016, its restaurant design and construction consisted of a kitchen housed in a one-story building, which was approximately 1,500 square feet, flanked by canopy-covered rows of 16 to 24 parking spaces, with each space having its own payment terminal, intercom speaker system and menu board. At a Sonic Drive-In, a customer drives into one of the parking spaces, orders through the intercom speaker system and has the food delivered by a carhop and Sonic Drive-Ins also include a drive-thru lane and patio seating to provide customers with alternative dining options. Its food items include specialty drinks, such as cherry limeades and slushes, ice cream desserts and chicken sandwiches and hamburgers.

Noodles & Company Profile

Noodles & Company develops and operates fast casual restaurants. The Company’s menu includes a range of cooked-to-order dishes, including noodles and pasta, soups, salads, sandwiches and appetizers. The Company has approximately 490 restaurants, including 420 Company-owned and 70 franchised locations, across 40 states, the District of Columbia and one Canadian province. The Company offers over 30 globally inspired Asian, Mediterranean and American dishes together on a single menu. The Company offers approximately 10 fresh vegetables and six proteins, including marinated steak, naturally raised pork, chicken, meatballs, shrimp and organic tofu. The Company offers Kids Meals, which includes sides, such as broccoli, carrots, fruit, applesauce and a portion of its housemade rice crispy treat. The Company’s restaurants’ locations include Arizona, California, Colorado, Delaware, New York, North Dakota, Ohio, Texas, Utah, Virginia, Washington and Wisconsin.

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