Contrasting Diversified Restaurant (SAUC) and Ruth's Hospitality Group (NASDAQ:RUTH)

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

Insider and Institutional Ownership

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10.6% of Diversified Restaurant shares are owned by institutional investors. Comparatively, 83.0% of Ruth's Hospitality Group shares are owned by institutional investors. 49.6% of Diversified Restaurant shares are owned by insiders. Comparatively, 7.5% of Ruth's Hospitality Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Diversified Restaurant and Ruth's Hospitality Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Diversified Restaurant $165.46 million 0.21 -$20.45 million ($0.05) -25.60
Ruth's Hospitality Group $414.82 million 1.92 $30.13 million $1.10 23.41

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

Dividends

Ruth's Hospitality Group pays an annual dividend of $0.44 per share and has a dividend yield of 1.7%. Diversified Restaurant does not pay a dividend. Ruth's Hospitality Group pays out 40.0% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Diversified Restaurant and Ruth's Hospitality Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diversified Restaurant 0 0 0 0 N/A
Ruth's Hospitality Group 0 3 1 0 2.25

Ruth's Hospitality Group has a consensus target price of $24.00, indicating a potential downside of 6.80%. Given Ruth's Hospitality Group’s higher possible upside, analysts plainly believe Ruth's Hospitality Group is more favorable than Diversified Restaurant.

Profitability

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

Net Margins Return on Equity Return on Assets
Diversified Restaurant -12.36% -4.31% -1.03%
Ruth's Hospitality Group 7.26% 40.65% 16.39%

Volatility & Risk

Diversified Restaurant has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500. Comparatively, Ruth's Hospitality Group has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500.

Summary

Ruth's Hospitality Group beats Diversified Restaurant on 12 of the 15 factors compared between the two stocks.

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.

Ruth's Hospitality Group Company Profile

Ruth's Hospitality Group, Inc., together with its subsidiaries, develops, operates, and franchises fine dining restaurants under the Ruth's Chris Steak House name. Its restaurants offer food and beverage products to special occasion diners and frequent customers, as well as business clientele. As of December 31, 2017, the company had 155 Ruth's Chris Steak House restaurants, including 77 company-owned restaurants; 2 restaurant operating under a contractual agreement; and 76 franchisee-owned restaurants comprising 21 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Panama, Singapore, Taiwan, and the United Arab Emirates. Ruth's Hospitality Group, Inc. was founded in 1965 and is headquartered in Winter Park, Florida.

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