Potbelly (NASDAQ: PBPB) and Luby’s (NYSE:LUB) are both small-cap cyclical consumer goods & services companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, risk, earnings, valuation and analyst recommendations.
This table compares Potbelly and Luby’s’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
73.8% of Potbelly shares are held by institutional investors. Comparatively, 41.2% of Luby’s shares are held by institutional investors. 9.6% of Potbelly shares are held by insiders. Comparatively, 35.2% of Luby’s shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
This is a summary of recent recommendations for Potbelly and Luby’s, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Potbelly presently has a consensus price target of $13.67, indicating a potential upside of 8.47%. Given Potbelly’s higher probable upside, equities research analysts plainly believe Potbelly is more favorable than Luby’s.
Earnings and Valuation
This table compares Potbelly and Luby’s’ 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|
|Luby’s||$376.03 million||0.22||-$23.26 million||($0.77)||-3.65|
Potbelly has higher revenue and earnings than Luby’s. Luby’s is trading at a lower price-to-earnings ratio than Potbelly, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Potbelly has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500. Comparatively, Luby’s has a beta of 0.52, indicating that its share price is 48% less volatile than the S&P 500.
Potbelly beats Luby’s on 11 of the 12 factors compared between the two stocks.
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.
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.
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