Denny’s Corporation (NASDAQ: DENN) and Luby’s (NYSE:LUB) are both small-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, risk, institutional ownership, profitability and valuation.

Institutional and Insider Ownership

92.5% of Denny’s Corporation shares are owned by institutional investors. Comparatively, 42.8% of Luby’s shares are owned by institutional investors. 5.2% of Denny’s Corporation shares are owned by company insiders. Comparatively, 35.2% of Luby’s shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Denny’s Corporation has a beta of 0.58, indicating that its stock price is 42% less volatile than the S&P 500. Comparatively, Luby’s has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Denny’s Corporation and Luby’s, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Denny’s Corporation 0 2 1 0 2.33
Luby’s 0 0 0 0 N/A

Denny’s Corporation presently has a consensus target price of $12.67, indicating a potential upside of 6.98%. Given Denny’s Corporation’s higher possible upside, analysts plainly believe Denny’s Corporation is more favorable than Luby’s.

Profitability

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

Net Margins Return on Equity Return on Assets
Denny’s Corporation 7.34% -60.77% 13.43%
Luby’s -6.96% -4.97% -3.16%

Valuation & Earnings

This table compares Denny’s Corporation and Luby’s’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Denny’s Corporation $519.28 million 1.53 $91.98 million $0.52 22.77
Luby’s $387.17 million 0.20 $13.97 million ($0.92) -2.91

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

Summary

Denny’s Corporation beats Luby’s on 9 of the 12 factors compared between the two stocks.

Denny’s Corporation Company Profile

Denny’s Corporation (Denny’s) operates a franchised full-service restaurant chain. The Company, through its subsidiary, Denny’s, Inc., owns and operates the Denny’s brand. As of December 28, 2016, the Denny’s brand consisted of 1,733 franchised, licensed and Company-operated restaurants around the world, including 1,610 restaurants in the United States and 123 international locations. As of December 28, 2016, 1,564 of its restaurants were franchised or licensed and 169 were Company-operated. In addition to its breakfast-all-day items, Denny’s offers a selection of lunch and dinner items, including burgers, sandwiches, salads and skillet entrees, along with an assortment of beverages, appetizers and desserts. The Company’s Fit Fare menu helps its guests identify items suited to their dietary needs. Most Denny’s restaurants offer special items for children and seniors. The Company has restaurant locations within travel centers, primarily with Pilot and Pilot Flying J Travel Centers.

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.

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