The Habit Restaurants (NASDAQ: HABT) and Potbelly Corporation (NASDAQ:PBPB) are both large-cap retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, profitability, valuation and earnings.

Risk and Volatility

The Habit Restaurants has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500. Comparatively, Potbelly Corporation has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for The Habit Restaurants and Potbelly Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Habit Restaurants 0 5 2 0 2.29
Potbelly Corporation 0 3 1 0 2.25

The Habit Restaurants currently has a consensus target price of $16.36, indicating a potential upside of 77.80%. Potbelly Corporation has a consensus target price of $13.67, indicating a potential upside of 23.68%. Given The Habit Restaurants’ stronger consensus rating and higher possible upside, research analysts plainly believe The Habit Restaurants is more favorable than Potbelly Corporation.

Valuation and Earnings

This table compares The Habit Restaurants and Potbelly Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
The Habit Restaurants $283.81 million 0.84 $4.66 million $0.23 40.00
Potbelly Corporation $407.13 million 0.68 $8.21 million $0.17 65.00

Potbelly Corporation has higher revenue and earnings than The Habit Restaurants. The Habit Restaurants is trading at a lower price-to-earnings ratio than Potbelly Corporation, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

73.8% of The Habit Restaurants shares are owned by institutional investors. Comparatively, 68.4% of Potbelly Corporation shares are owned by institutional investors. 16.1% of The Habit Restaurants shares are owned by insiders. Comparatively, 9.6% of Potbelly Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares The Habit Restaurants and Potbelly Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Habit Restaurants 1.46% 4.11% 1.78%
Potbelly Corporation 1.03% 8.68% 6.15%

Summary

The Habit Restaurants beats Potbelly Corporation on 10 of the 14 factors compared between the two stocks.

The Habit Restaurants Company Profile

The Habit Restaurants, Inc. (Habit Burger Grill) is a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. It operates a range of restaurant formats, including end-cap, free-standing, inline, end-cap drive-thru and traditional stand-alone drive-in, primarily within suburban shopping centers and retail settings. As of December 27, 2016, the Company had 172 locations in 15 markets in 10 states and the United Arab Emirates, including franchised/licensed locations (excluding six licensed locations in Santa Barbara County, California).

Potbelly Corporation Company Profile

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.

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