Critical Survey: Red Rock Resorts (NASDAQ:RRR) vs. Nathan’s Famous (NASDAQ:NATH)

Red Rock Resorts (NASDAQ:RRR) and Nathan’s Famous (NASDAQ:NATH) are both consumer discretionary companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, risk, institutional ownership, dividends, profitability and earnings.

Profitability

This table compares Red Rock Resorts and Nathan’s Famous’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Red Rock Resorts	8.43%	56.19%	4.01%
Nathan’s Famous	11.78%	-187.25%	34.31%

Analyst Ratings

This is a breakdown of current ratings and price targets for Red Rock Resorts and Nathan’s Famous, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Red Rock Resorts	0	4	15	0	2.79
Nathan’s Famous	0	0	1	0	3.00

Red Rock Resorts presently has a consensus target price of $71.94, indicating a potential upside of 25.89%. Given Red Rock Resorts’ higher probable upside, equities analysts plainly believe Red Rock Resorts is more favorable than Nathan’s Famous.

Earnings and Valuation

This table compares Red Rock Resorts and Nathan’s Famous”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Red Rock Resorts	$2.01 billion	2.98	$188.07 million	$2.83	20.19
Nathan’s Famous	$162.06 million	2.50	$20.02 million	$4.83	20.43

Red Rock Resorts has higher revenue and earnings than Nathan’s Famous. Red Rock Resorts is trading at a lower price-to-earnings ratio than Nathan’s Famous, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

47.8% of Red Rock Resorts shares are owned by institutional investors. Comparatively, 66.5% of Nathan’s Famous shares are owned by institutional investors. 54.3% of Red Rock Resorts shares are owned by insiders. Comparatively, 30.7% of Nathan’s Famous shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Red Rock Resorts has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, Nathan’s Famous has a beta of 0.28, indicating that its share price is 72% less volatile than the S&P 500.

Dividends

Red Rock Resorts pays an annual dividend of $1.04 per share and has a dividend yield of 1.8%. Nathan’s Famous pays an annual dividend of $2.00 per share and has a dividend yield of 2.0%. Red Rock Resorts pays out 36.7% of its earnings in the form of a dividend. Nathan’s Famous pays out 41.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Red Rock Resorts beats Nathan’s Famous on 9 of the 16 factors compared between the two stocks.

About Red Rock Resorts

Red Rock Resorts, Inc., through its interest in Station Casinos LLC, develops and operates casino and entertainment properties in the United States. The company owns and operates gaming and entertainment facilities, including Durango Casino & Resort and smaller casinos in the Las Vegas regional market. The company was formerly known as Station Casinos Corp. and changed its name to Red Rock Resorts, Inc. in January 2016. Red Rock Resorts, Inc. was founded in 1976 and is based in Las Vegas, Nevada.

About Nathan’s Famous

Nathan’s Famous, Inc. engages in the operation of franchised fast-food units. It is involved in the licensing, wholesaling, and retailing of products marketed under the Nathan’s Famous brand. The firm operates through the following business segments: Branded Product Program, Product Licensing, Restaurant Operations, and Corporate. The Branded Product Program segment markets and sells hot dog products. The Product Licensing segment is composed of royalties from licensing a variety of Nathan’s Famous products such as hotdogs, sausage and corned beef products, frozen French fries, and additional products through retail grocery channels and club stores. The Restaurant Operations segment deals with the sale of products at company-owned restaurants and fees and royalties from franchised restaurants. The Corporate segment includes administrative expenses such as executive management, finance, information technology, legal, insurance, corporate office costs, corporate incentive compensation, and compliance costs. The company was founded by Nathan Handwerker in 1916 and is headquartered in Jericho, NY.