Potbelly (NASDAQ: PBPB) and The ONE Group Hospitality (NASDAQ:STKS) are both small-cap cyclical consumer goods & services companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Profitability

This table compares Potbelly and The ONE Group Hospitality’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly 0.54% 7.80% 5.48%
The ONE Group Hospitality -25.48% -68.30% -7.44%

Insider & Institutional Ownership

73.8% of Potbelly shares are held by institutional investors. Comparatively, 14.5% of The ONE Group Hospitality shares are held by institutional investors. 9.6% of Potbelly shares are held by insiders. Comparatively, 35.9% of The ONE Group Hospitality shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Potbelly and The ONE Group Hospitality’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Potbelly $407.13 million 0.77 $8.21 million $0.09 140.00
The ONE Group Hospitality $72.41 million 0.80 -$16.68 million ($0.79) -2.91

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

Analyst Ratings

This is a summary of current ratings and price targets for Potbelly and The ONE Group Hospitality, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly 0 3 1 0 2.25
The ONE Group Hospitality 0 0 0 0 N/A

Potbelly currently has a consensus target price of $13.67, suggesting a potential upside of 8.47%. Given Potbelly’s higher possible upside, research analysts clearly believe Potbelly is more favorable than The ONE Group Hospitality.

Volatility and Risk

Potbelly has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500. Comparatively, The ONE Group Hospitality has a beta of 0.38, indicating that its share price is 62% less volatile than the S&P 500.

Summary

Potbelly beats The ONE Group Hospitality on 10 of the 12 factors compared between the two stocks.

Potbelly 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.

The ONE Group Hospitality Company Profile

The ONE Group Hospitality, Inc., formerly Committed Capital Acquisition Corporation, is a hospitality company. The Company develops, owns and operates restaurants and lounges, and provides food and beverage services for hospitality venues, including hotels, casinos and other locations across the globe. It operates through three segments: owned STK units (STKs), F&B hospitality management agreements (F&B), and Other concepts (Other). Its STKs segment consists of leased restaurant locations. Its F&B segment consists of management agreements, in which the Company operates the food and beverage services in hotels or casinos and could include an STK. Its Other segment includes owned non-STK leased locations. Its restaurant brand is STK, a multi-unit steakhouse concept with locations in metropolitan cities around the globe. Its F&B hospitality management services include developing, managing and operating restaurants, bars, rooftop lounges, pools, banqueting and catering facilities.

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