Contrasting Sonic (SONC) & Star Buffet (STRZ)

Sonic (NASDAQ:SONC) and Star Buffet (OTCMKTS:STRZ) are both small-cap retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, earnings, valuation, profitability and analyst recommendations.

Risk and Volatility

Sonic has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, Star Buffet has a beta of 3.45, indicating that its stock price is 245% more volatile than the S&P 500.

Valuation and Earnings

This table compares Sonic and Star Buffet’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sonic $423.59 million 3.66 $71.20 million $1.49 29.19
Star Buffet $26.52 million 0.08 $120,000.00 N/A N/A

Sonic has higher revenue and earnings than Star Buffet.

Dividends

Sonic pays an annual dividend of $0.64 per share and has a dividend yield of 1.5%. Star Buffet does not pay a dividend. Sonic pays out 43.0% of its earnings in the form of a dividend. Sonic has raised its dividend for 4 consecutive years.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Sonic and Star Buffet, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic 0 11 1 0 2.08
Star Buffet 0 0 0 0 N/A

Sonic currently has a consensus target price of $37.00, indicating a potential downside of 14.92%. Given Sonic’s higher probable upside, equities analysts plainly believe Sonic is more favorable than Star Buffet.

Profitability

This table compares Sonic and Star Buffet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sonic 16.81% -21.64% 10.39%
Star Buffet -1.04% N/A -3.89%

Insider and Institutional Ownership

89.1% of Sonic shares are owned by institutional investors. 8.3% of Sonic shares are owned by company insiders. Comparatively, 53.6% of Star Buffet shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Sonic beats Star Buffet on 10 of the 14 factors compared between the two stocks.

Sonic Company Profile

Sonic Corp., through its subsidiaries, operates and franchises a chain of drive-in restaurants in the United States. As of August 31, 2018, the company operated 3,606 Sonic Drive-Ins in 45 states, including 3,427 Drive-Ins owned and operated by franchisees; and 179 Drive-Ins owned and operated by the company. The company also owns and leases 162 properties; and sublease 48 properties to franchisees and other parties. Sonic Corp. was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.

Star Buffet Company Profile

Star Buffet, Inc. owns and operates full service restaurants in the United States. As of July 19, 2018, it operated 27 restaurants in 10 states. The company operates its restaurants under the 4B's, JB's, Barnhill's Salads Buffet Desserts, Casa Bonita, and BuddyFreddys names. Star Buffet, Inc. was founded in 1997 and is based in Scottsdale, Arizona.

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