Nathan’s Famous (NYSE: EAT) and Brinker International (NYSE:EAT) 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 risk, dividends, profitability, earnings, valuation, institutional ownership and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings and price targets for Nathan’s Famous and Brinker International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nathan’s Famous 0 0 0 0 N/A
Brinker International 2 7 5 0 2.21

Brinker International has a consensus price target of $44.71, indicating a potential upside of 2.46%. Given Brinker International’s higher possible upside, analysts plainly believe Brinker International is more favorable than Nathan’s Famous.

Dividends

Nathan’s Famous pays an annual dividend of $1.00 per share and has a dividend yield of 1.1%. Brinker International pays an annual dividend of $1.52 per share and has a dividend yield of 3.5%. Brinker International pays out 43.4% of its earnings in the form of a dividend. Brinker International has increased its dividend for 7 consecutive years. Brinker International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

40.4% of Nathan’s Famous shares are owned by institutional investors. 32.4% of Nathan’s Famous shares are owned by insiders. Comparatively, 1.9% of Brinker International shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Nathan’s Famous and Brinker International’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Nathan’s Famous $104.20 million 3.58 $2.63 million N/A N/A
Brinker International $3.14 billion 0.57 $125.88 million $3.50 12.47

Brinker International has higher revenue and earnings than Nathan’s Famous.

Risk & Volatility

Nathan’s Famous has a beta of -0.25, suggesting that its stock price is 125% less volatile than the S&P 500. Comparatively, Brinker International has a beta of -0.04, suggesting that its stock price is 104% less volatile than the S&P 500.

Profitability

This table compares Nathan’s Famous and Brinker International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nathan’s Famous 4.34% -12.96% 12.03%
Brinker International 4.01% -26.82% 11.89%

Summary

Nathan’s Famous beats Brinker International on 8 of the 15 factors compared between the two stocks.

About Nathan’s Famous

Nathan's Famous, Inc., together with its subsidiaries, operates in the foodservice industry. The company owns and franchises restaurants under the Nathan's Famous brand name, as well as sells products bearing the Nathan's Famous trademarks through various channels of distribution. It also has license agreements for the manufacture, distribution, marketing, and sale of Nathan's Famous branded hot dogs, sausages, and corned beef products in refrigerated consumer packages to be resold through retail channels, such as supermarkets, groceries, mass merchandisers, and club stores; and other Nathan's Famous branded refrigerated meat products in consumer packages to be resold through retail channels. In addition, the company has license agreements to manufacture Nathan's Famous branded hot dog and sausage products in bulk for use in the food service industry; for supplying Nathan's Famous natural casing and skinless hot dogs in bulk for use in the Nathan's Famous restaurant system; to manufacture proprietary spices; to manufacture and sell various products, including mustard, salsa, sauerkraut, and pickles; to produce and sell French fries and onion rings for retail sale; and to manufacture and sell miniature bagel dogs, franks-in-a-blanket, and other hors d'oeuvres through club stores, supermarkets, and other retail food stores. Further, the company sells Nathan's products directly to end users or to various foodservice distributors, as well as provides Arthur Treacher's brand fish fillets. As of March 25, 2018, its restaurant system consisted of 5 company-owned units in the New York City metropolitan area; and 276 franchised units located in 20 states and 12 foreign countries. Nathan's Famous, Inc. was founded in 1916 and is based in Jericho, New York.

About Brinker International

Brinker International, Inc., together with its subsidiaries, owns, develops, operates, and franchises casual dining restaurants worldwide. As of June 28, 2017, it owned, operated, or franchised 1,674 restaurants comprising 1,622 restaurants under the Chili's Grill & Bar brand name; and 52 restaurants under the Maggiano's Little Italy brand name. The company was founded in 1975 and is based in Dallas, Texas.

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