The ONE Group Hospitality (NASDAQ: STKS) and Diversified Restaurant (NASDAQ:SAUC) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
The ONE Group Hospitality -25.48% -68.30% -7.44%
Diversified Restaurant -3.04% -4.31% 0.11%

Analyst Recommendations

This is a breakdown of current ratings and price targets for The ONE Group Hospitality and Diversified Restaurant, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The ONE Group Hospitality 0 0 0 0 N/A
Diversified Restaurant 0 0 1 0 3.00

Diversified Restaurant has a consensus target price of $3.50, indicating a potential upside of 133.33%. Given Diversified Restaurant’s higher possible upside, analysts clearly believe Diversified Restaurant is more favorable than The ONE Group Hospitality.

Valuation and Earnings

This table compares The ONE Group Hospitality and Diversified Restaurant’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
The ONE Group Hospitality $72.41 million 0.73 -$16.68 million ($0.80) -2.61
Diversified Restaurant $166.52 million 0.24 -$6.00 million ($0.19) -7.89

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

Risk & Volatility

The ONE Group Hospitality has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500. Comparatively, Diversified Restaurant has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.

Insider and Institutional Ownership

14.5% of The ONE Group Hospitality shares are held by institutional investors. Comparatively, 8.7% of Diversified Restaurant shares are held by institutional investors. 35.9% of The ONE Group Hospitality shares are held by insiders. Comparatively, 48.2% of Diversified Restaurant shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

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

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.

Diversified Restaurant Company Profile

Diversified Restaurant Holdings, Inc. (DRH) is a restaurant company. The Company is a franchisee of Buffalo Wild Wings (BWW).As of September 25, 2016, the Company operated 64 BWW restaurants, which are located in Michigan, Florida, Missouri, Illinois and Indiana. The BWW restaurants feature a range of menu items with a multimedia social environment, a bar and an open layout designed to create a dining experience for sports fans and families. Its guests have the option of watching various sporting events on projection screens or televisions. As of September 25, 2016, the BWW menu specialized in 21 sauces and seasonings with flavors ranging from Sweet BBQ to Blazin’. As of September 25, 2016, the restaurants offered 12 to 30 domestic and imported beers on tap, including several local or regional microbrews and a selection of bottled beer, wine and liquor.

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