Sonic Corp. (NASDAQ: SONC) and Wingstop (NASDAQ:WING) are both small-cap cyclical consumer goods & services companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, analyst recommendations, earnings, dividends and profitability.

Profitability

This table compares Sonic Corp. and Wingstop’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sonic Corp. 16.86% N/A 14.85%
Wingstop 19.28% -28.04% 17.56%

Dividends

Sonic Corp. pays an annual dividend of $0.56 per share and has a dividend yield of 2.2%. Wingstop pays an annual dividend of $0.07 per share and has a dividend yield of 0.2%. Sonic Corp. pays out 38.1% of its earnings in the form of a dividend. Wingstop pays out 10.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Volatility & Risk

Sonic Corp. has a beta of 1.76, indicating that its share price is 76% more volatile than the S&P 500. Comparatively, Wingstop has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500.

Valuation and Earnings

This table compares Sonic Corp. and Wingstop’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sonic Corp. $477.27 million 2.20 $159.99 million $1.47 17.28
Wingstop $97.80 million 10.07 $35.13 million $0.64 52.92

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

Analyst Ratings

This is a summary of current recommendations and price targets for Sonic Corp. and Wingstop, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic Corp. 1 6 5 0 2.33
Wingstop 0 4 5 1 2.70

Sonic Corp. presently has a consensus target price of $27.82, suggesting a potential upside of 9.52%. Wingstop has a consensus target price of $34.89, suggesting a potential upside of 3.01%. Given Sonic Corp.’s higher probable upside, equities analysts plainly believe Sonic Corp. is more favorable than Wingstop.

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.

Wingstop Company Profile

Wingstop Inc. is franchisor and operator of restaurants that specializes in cooked-to-order, hand-sauced and tossed chicken wings. The Company operates through two segments: Franchise and Company. As of December 31, 2016, the Company offers its guests 11 flavors on bone-in and boneless chicken wings paired with hand-cut, seasoned fries and sides. It is a casual chicken wings-focused restaurant chain with various concepts, which include wings as add-on menu items or focus on wings in a bar or sports-centric setting. The flavors include Atomic, Mango Habanero, Cajun, Original Hot, Louisiana Rub, Mild, Hickory Smoked BBQ, Lemon Pepper, Garlic Parmesan, Hawaiian and Teriyaki. It offers various order options, including eat-in, to go, individual, combo meals and family packs. The Company maintains Website hosting, and manages the development and maintenance of the mobile Wingstop application. It markets Wingstop products, services and restaurants through the Website, www.wingstop.com.

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