Ruby Tuesday (NYSE: RT) and Kona Grill (NASDAQ:KONA) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, institutional ownership, analyst recommendations, risk and profitability.

Earnings & Valuation

This table compares Ruby Tuesday and Kona Grill’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ruby Tuesday $951.97 million 0.14 $29.49 million ($1.76) -1.22
Kona Grill $179.15 million 0.22 $3.91 million ($2.58) -1.49

Ruby Tuesday has higher revenue and earnings than Kona Grill. Kona Grill is trading at a lower price-to-earnings ratio than Ruby Tuesday, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Ruby Tuesday and Kona Grill’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ruby Tuesday -11.15% -5.30% -2.30%
Kona Grill -14.98% -39.42% -11.31%

Institutional & Insider Ownership

76.1% of Ruby Tuesday shares are held by institutional investors. Comparatively, 50.1% of Kona Grill shares are held by institutional investors. 4.8% of Ruby Tuesday shares are held by insiders. Comparatively, 29.2% of Kona Grill shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

Ruby Tuesday has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500. Comparatively, Kona Grill has a beta of 0.34, suggesting that its share price is 66% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Ruby Tuesday and Kona Grill, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ruby Tuesday 0 0 0 0 N/A
Kona Grill 0 2 3 0 2.60

Kona Grill has a consensus target price of $6.67, suggesting a potential upside of 73.16%. Given Kona Grill’s higher possible upside, analysts clearly believe Kona Grill is more favorable than Ruby Tuesday.

Summary

Ruby Tuesday beats Kona Grill on 8 of the 12 factors compared between the two stocks.

About Ruby Tuesday

Ruby Tuesday, Inc. owns and operates Ruby Tuesday casual dining and Lime Fresh Mexican Grill (Lime Fresh) casual restaurants. The Company also franchises the Ruby Tuesday concept in selected domestic and international markets, and the Lime Fresh concept in selected domestic markets. Its segments include Ruby Tuesday concept and Lime Fresh concept. As of March 1, 2016, the Company operated 729 Ruby Tuesday restaurants in 44 states, 13 foreign countries, and Guam, and there were 16 Lime Fresh restaurants in two states. Of those restaurants, it owned and operated approximately 649 Ruby Tuesday restaurants and franchised over 80 Ruby Tuesday restaurants, which consisted of 28 domestic and 52 international restaurants. It also owned and operated over eight Lime Fresh restaurants and franchised eight Lime Fresh domestic restaurants. The Company’s corporate-owned and operated restaurants are concentrated primarily in the Southeast, Northeast, Mid-Atlantic and Midwest of the United States.

About Kona Grill

Kona Grill, Inc. owns and operates upscale casual dining restaurants under the name Kona Grill. The Company owns and operates approximately 40 restaurants in 20 states throughout the United States and Puerto Rico. Its high-volume upscale casual restaurants feature a global menu of contemporary American favorites and sushi. Its menu items are prepared from scratch at each restaurant location and incorporate over 40 signature sauces and dressings. It also offers a full service bar offering a range assortment of wines, specialty cocktails and beers. Its restaurants seat an average of approximately 290 customers and comprise multiple dining areas. Its dining area, full-service bar, indoor/outdoor patio and sushi bar provide a choice of atmospheres and a range of environments. It locates its restaurants in various areas, such as retail centers, shopping malls, urban entertainment districts and lifestyle centers that are situated near commercial office space and residential housing.

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