Comparing Wendy’s (NASDAQ:WEN) and Dave & Buster’s Entertainment (NASDAQ:PLAY)

Dave & Buster’s Entertainment (NASDAQ:PLAY) and Wendy’s (NASDAQ:WEN) are both small-cap retail/wholesale companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, risk, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Dave & Buster’s Entertainment and Wendy’s, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dave & Buster’s Entertainment	2	5	2	0	2.00
Wendy’s	6	13	3	0	1.86

Dave & Buster’s Entertainment presently has a consensus price target of $19.33, suggesting a potential upside of 95.88%. Wendy’s has a consensus price target of $8.06, suggesting a potential upside of 15.34%. Given Dave & Buster’s Entertainment’s stronger consensus rating and higher possible upside, research analysts clearly believe Dave & Buster’s Entertainment is more favorable than Wendy’s.

Insider and Institutional Ownership

91.4% of Dave & Buster’s Entertainment shares are held by institutional investors. Comparatively, 86.0% of Wendy’s shares are held by institutional investors. 1.7% of Dave & Buster’s Entertainment shares are held by insiders. Comparatively, 17.1% of Wendy’s shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Dave & Buster’s Entertainment has a beta of 1.84, indicating that its share price is 84% more volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.36, indicating that its share price is 64% less volatile than the S&P 500.

Valuation and Earnings

This table compares Dave & Buster’s Entertainment and Wendy’s”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dave & Buster’s Entertainment	$2.10 billion	0.16	-$48.70 million	($1.89)	-5.22
Wendy’s	$2.18 billion	0.61	$165.07 million	$0.78	8.96

Wendy’s has higher revenue and earnings than Dave & Buster’s Entertainment. Dave & Buster’s Entertainment is trading at a lower price-to-earnings ratio than Wendy’s, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Dave & Buster’s Entertainment and Wendy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Dave & Buster’s Entertainment	-3.09%	-24.19%	-0.72%
Wendy’s	6.77%	136.46%	3.14%

Summary

Wendy’s beats Dave & Buster’s Entertainment on 10 of the 14 factors compared between the two stocks.

About Dave & Buster’s Entertainment

Dave & Buster's Entertainment, Inc. owns and operates entertainment and dining venues for adults and families. Its venues offer a menu of entrees and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. The company operates its venues under the Dave & Buster's name. As of April 02, 2019, it owned and operated 125 venues in 39 states, Puerto Rico, and Canada. The company was founded in 1982 and is headquartered in Dallas, Texas.

About Wendy’s

The Wendy’s Co. engages in operating, developing, and franchising a system of quick-service restaurants. It operates through the following segments: Wendy’s U.S., Wendy’s International, and Global Real Estate and Development. The Wendy’s U.S. segment includes the operation and franchising of Wendy’s restaurants in the U.S. The Wendy’s International segment is involved in the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. The Global Real Estate and Development segment focuses on real estate activity for owned sites and sites leased from third parties. The company was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH.