Red Robin Gourmet Burgers (NASDAQ: RRGB) and Sonic Corp. (NASDAQ:SONC) are both small-cap retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Profitability

This table compares Red Robin Gourmet Burgers and Sonic Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Robin Gourmet Burgers 0.64% 8.00% 3.18%
Sonic Corp. 13.23% -44.21% 9.71%

Valuation & Earnings

This table compares Red Robin Gourmet Burgers and Sonic Corp.’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Red Robin Gourmet Burgers $1.32 billion 0.56 $131.93 million $0.64 90.08
Sonic Corp. $515.82 million 1.89 $158.68 million $1.50 15.54

Sonic Corp. has higher revenue, but lower earnings than Red Robin Gourmet Burgers. Sonic Corp. is trading at a lower price-to-earnings ratio than Red Robin Gourmet Burgers, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Red Robin Gourmet Burgers has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500. Comparatively, Sonic Corp. has a beta of 1.74, meaning that its share price is 74% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Red Robin Gourmet Burgers and Sonic Corp., as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Robin Gourmet Burgers 0 4 6 0 2.60
Sonic Corp. 1 7 4 0 2.25

Red Robin Gourmet Burgers presently has a consensus target price of $72.00, suggesting a potential upside of 24.89%. Sonic Corp. has a consensus target price of $27.64, suggesting a potential upside of 18.56%. Given Red Robin Gourmet Burgers’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Red Robin Gourmet Burgers is more favorable than Sonic Corp..

Dividends

Sonic Corp. pays an annual dividend of $0.56 per share and has a dividend yield of 2.4%. Red Robin Gourmet Burgers does not pay a dividend. Sonic Corp. pays out 37.3% of its earnings in the form of a dividend.

Institutional & Insider Ownership

97.5% of Sonic Corp. shares are held by institutional investors. 2.7% of Red Robin Gourmet Burgers shares are held by insiders. Comparatively, 6.2% of Sonic Corp. shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Sonic Corp. beats Red Robin Gourmet Burgers on 9 of the 16 factors compared between the two stocks.

Red Robin Gourmet Burgers Company Profile

Red Robin Gourmet Burgers, Inc., together with its subsidiaries, primarily develops, operates, and franchises full-service restaurants in North America and focuses on serving selection of gourmet burgers. The Company’s menu features a line of gourmet burgers, which it makes from ground beef, as well as its line of Red’s Tavern Double Burgers and its Red Robin’s line of half-pound Angus beef burgers with various toppings. The Company also offers burgers made from chicken breasts, fish fillets, turkey patties, as well as vegetarian and vegan options. The Company offered a selection of buns, including ciabatta, gluten free, sesame, onion, whole grain, jalapeno and lettuce wraps a range of toppings, including fresh guacamole, house made barbeque sauces, aiolis, grilled pineapple, crispy onion straws, sauteed mushrooms, fried jalapenos, bruschetta salsa, coleslaw, eight different cheese choices and a fried egg, as of December 25, 2016.

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.

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