Head-To-Head Analysis: Ruby Tuesday (RT) & Darden Restaurants (DRI)

Ruby Tuesday (NYSE: RT) and Darden Restaurants (NYSE:DRI) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, dividends, analyst recommendations, profitability, earnings and valuation.

Valuation & Earnings

This table compares Ruby Tuesday and Darden Restaurants’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ruby Tuesday $951.97 million 0.15 -$106.14 million ($1.27) -1.89
Darden Restaurants $7.17 billion 1.68 $479.10 million $3.97 24.61

Darden Restaurants has higher revenue and earnings than Ruby Tuesday. Ruby Tuesday is trading at a lower price-to-earnings ratio than Darden Restaurants, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Ruby Tuesday and Darden Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ruby Tuesday -4.53% -13.05% -5.54%
Darden Restaurants 6.46% 26.24% 10.27%

Risk and Volatility

Ruby Tuesday has a beta of 0.54, meaning that its share price is 46% less volatile than the S&P 500. Comparatively, Darden Restaurants has a beta of 0.16, meaning that its share price is 84% less volatile than the S&P 500.

Dividends

Darden Restaurants pays an annual dividend of $2.52 per share and has a dividend yield of 2.6%. Ruby Tuesday does not pay a dividend. Darden Restaurants pays out 63.5% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Ruby Tuesday and Darden Restaurants, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ruby Tuesday 0 0 0 0 N/A
Darden Restaurants 1 14 9 0 2.33

Darden Restaurants has a consensus target price of $96.29, suggesting a potential downside of 1.44%. Given Darden Restaurants’ higher possible upside, analysts plainly believe Darden Restaurants is more favorable than Ruby Tuesday.

Insider and Institutional Ownership

77.2% of Ruby Tuesday shares are held by institutional investors. Comparatively, 92.1% of Darden Restaurants shares are held by institutional investors. 4.8% of Ruby Tuesday shares are held by company insiders. Comparatively, 0.6% of Darden Restaurants shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Darden Restaurants beats Ruby Tuesday on 12 of the 15 factors compared between the two stocks.

Ruby Tuesday Company Profile

Ruby Tuesday, Inc. owns and operates Ruby Tuesday casual dining and Lime Fresh Mexican Grill (Lime Fresh) casual restaurants. The Company also franchises the Ruby Tuesday concept in selected domestic and international markets, and the Lime Fresh concept in selected domestic markets. Its segments include Ruby Tuesday concept and Lime Fresh concept. As of March 1, 2016, the Company operated 729 Ruby Tuesday restaurants in 44 states, 13 foreign countries, and Guam, and there were 16 Lime Fresh restaurants in two states. Of those restaurants, it owned and operated approximately 649 Ruby Tuesday restaurants and franchised over 80 Ruby Tuesday restaurants, which consisted of 28 domestic and 52 international restaurants. It also owned and operated over eight Lime Fresh restaurants and franchised eight Lime Fresh domestic restaurants. The Company’s corporate-owned and operated restaurants are concentrated primarily in the Southeast, Northeast, Mid-Atlantic and Midwest of the United States.

Darden Restaurants Company Profile

Darden Restaurants, Inc. is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements. Olive Garden’s menu includes a range of authentic Italian foods featuring fresh ingredients and a selection of imported Italian wines. LongHorn Steakhouse restaurants feature a range of menu items, including fresh steaks and chicken, as well as salmon, shrimp, ribs, pork chops, burgers and prime rib.

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