Potbelly Corporation (NASDAQ: PBPB) and Del Frisco’s Restaurant Group (NASDAQ:DFRG) 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 profitability, earnings, risk, dividends, analyst recommendations, institutional ownership and valuation.

Institutional and Insider Ownership

72.8% of Potbelly Corporation shares are held by institutional investors. Comparatively, 99.2% of Del Frisco’s Restaurant Group shares are held by institutional investors. 9.6% of Potbelly Corporation shares are held by company insiders. Comparatively, 2.4% of Del Frisco’s Restaurant Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Potbelly Corporation and Del Frisco’s Restaurant Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Potbelly Corporation $415.98 million 0.73 $39.72 million $0.17 71.18
Del Frisco’s Restaurant Group $356.76 million 0.74 $41.74 million $0.45 27.67

Del Frisco’s Restaurant Group has higher revenue, but lower earnings than Potbelly Corporation. Del Frisco’s Restaurant Group is trading at a lower price-to-earnings ratio than Potbelly Corporation, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Potbelly Corporation has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, Del Frisco’s Restaurant Group has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500.

Profitability

This table compares Potbelly Corporation and Del Frisco’s Restaurant Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly Corporation 1.03% 8.68% 6.15%
Del Frisco’s Restaurant Group 3.00% 6.94% 4.29%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Potbelly Corporation and Del Frisco’s Restaurant Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly Corporation 0 3 1 0 2.25
Del Frisco’s Restaurant Group 0 4 1 0 2.20

Potbelly Corporation presently has a consensus target price of $13.67, suggesting a potential upside of 12.95%. Del Frisco’s Restaurant Group has a consensus target price of $16.00, suggesting a potential upside of 28.51%. Given Del Frisco’s Restaurant Group’s higher possible upside, analysts plainly believe Del Frisco’s Restaurant Group is more favorable than Potbelly Corporation.

Summary

Potbelly Corporation beats Del Frisco’s Restaurant Group on 7 of the 13 factors compared between the two stocks.

About Potbelly Corporation

Potbelly Corporation owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. As of December 25, 2016, the Company operated Potbelly Sandwich Works sandwich shops in 29 states and the District of Columbia. As of December 25, 2016, the Company had a domestic base of 441 shops in 29 states and the District of Columbia. Of these, the company operated 411 shops, and franchisees operated 30 shops, as of December 25, 2016. As of December 25, 2016, the Company had 13 international franchised shops, which included 11 shops in the Middle East, a shop in the United Kingdom and a shop in Canada. As of December 25, 2016, the Company had domestic franchise shops in Arkansas, Iowa, Illinois, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Virginia.

About Del Frisco’s Restaurant Group

Del Frisco’s Restaurant Group, Inc. develops, owns and operates three contemporary, complementary restaurants: Del Frisco’s Double Eagle Steak House (Del Frisco’s), Sullivan’s Steakhouse (Sullivan’s) and Del Frisco’s Grille (the Grille). As of December 27, 2016, the Company operated 53 restaurants in 24 states and the District of Columbia in the United States. The Company’s segments include Del Frisco’s, Sullivan’s and the Grille. Del Frisco’s is a steakhouse concept in the United States. The Del Frisco’s brand’s menu includes the United States Department of Agriculture (USDA) Prime grade, wet-aged steaks hand-cut at the time of order and a range of other offerings, including prime lamb, fresh seafood, and signature side dishes and desserts. Each restaurant has a sommelier to guide diners through a wine list. As of December 27, 2016, the Company operated 12 Del Frisco’s steakhouses in nine states and the District of Columbia. Sullivan’s is a complementary concept to Del Frisco’s.

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