Dave & Buster’s Entertainment (NASDAQ: PLAY) and RCI Hospitality Holdings (NASDAQ:RICK) are both retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, profitabiliy, dividends, analyst recommendations, risk and institutional ownership.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Dave & Buster’s Entertainment and RCI Hospitality Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dave & Buster’s Entertainment 0 0 9 0 3.00
RCI Hospitality Holdings 0 0 2 0 3.00

Dave & Buster’s Entertainment presently has a consensus price target of $77.50, indicating a potential upside of 26.55%. RCI Hospitality Holdings has a consensus price target of $28.50, indicating a potential upside of 24.35%. Given Dave & Buster’s Entertainment’s higher probable upside, analysts plainly believe Dave & Buster’s Entertainment is more favorable than RCI Hospitality Holdings.

Dividends

RCI Hospitality Holdings pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. Dave & Buster’s Entertainment does not pay a dividend. RCI Hospitality Holdings pays out 12.0% of its earnings in the form of a dividend.

Profitability

This table compares Dave & Buster’s Entertainment and RCI Hospitality Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dave & Buster’s Entertainment 9.78% 22.71% 9.34%
RCI Hospitality Holdings 7.16% 9.97% 4.77%

Volatility & Risk

Dave & Buster’s Entertainment has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500. Comparatively, RCI Hospitality Holdings has a beta of 0.25, meaning that its share price is 75% less volatile than the S&P 500.

Institutional & Insider Ownership

40.3% of RCI Hospitality Holdings shares are owned by institutional investors. 5.6% of Dave & Buster’s Entertainment shares are owned by insiders. Comparatively, 6.9% of RCI Hospitality Holdings shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Dave & Buster’s Entertainment and RCI Hospitality Holdings’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dave & Buster’s Entertainment $1.05 billion 2.42 $254.99 million $2.36 25.95
RCI Hospitality Holdings $135.25 million 1.65 $33.74 million $1.00 22.92

Dave & Buster’s Entertainment has higher revenue and earnings than RCI Hospitality Holdings. RCI Hospitality Holdings is trading at a lower price-to-earnings ratio than Dave & Buster’s Entertainment, indicating that it is currently the more affordable of the two stocks.

Summary

Dave & Buster’s Entertainment beats RCI Hospitality Holdings on 12 of the 15 factors compared between the two stocks.

RCI Hospitality Holdings Company Profile

With more than 40 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country’s leading company in gentlemen’s clubs and sports bars/restaurants. Clubs in New York City, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, and other cities operate under brand names, such as “Rick’s Cabaret,” “XTC,” “Club Onyx,” “Vivid Cabaret,” “Jaguars” and “Tootsie’s Cabaret.” Sports bars/restaurants operate under the brand name “Bombshells Restaurant & Bar.” Investors are attracted by RCI’s strong cash flow, operating margins and local laws that create high barriers to entry in the gentlemen’s club business.

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