Luby’s (NYSE: LUB) and The Habit Restaurants (NASDAQ:HABT) 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 risk, institutional ownership, dividends, valuation, earnings, profitability and analyst recommendations.

Profitability

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

Net Margins Return on Equity Return on Assets
Luby’s -6.19% -6.47% -4.08%
The Habit Restaurants 1.46% 4.09% 1.75%

Valuation & Earnings

This table compares Luby’s and The Habit Restaurants’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Luby’s $376.03 million 0.21 -$23.26 million ($0.79) -3.39
The Habit Restaurants $283.81 million 0.84 $4.66 million $0.23 40.00

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

Analyst Ratings

This is a breakdown of current ratings for Luby’s and The Habit Restaurants, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Luby’s 0 0 0 0 N/A
The Habit Restaurants 0 5 2 0 2.29

The Habit Restaurants has a consensus price target of $16.36, suggesting a potential upside of 77.80%. Given The Habit Restaurants’ higher probable upside, analysts plainly believe The Habit Restaurants is more favorable than Luby’s.

Insider and Institutional Ownership

41.2% of Luby’s shares are held by institutional investors. Comparatively, 76.3% of The Habit Restaurants shares are held by institutional investors. 35.2% of Luby’s shares are held by insiders. Comparatively, 16.1% of The Habit Restaurants shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

The Habit Restaurants beats Luby’s on 9 of the 11 factors compared between the two stocks.

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.

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).

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