Potbelly Corporation (NASDAQ: PBPB) and Ruby Tuesday (NYSE:RT) are both small-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, institutional ownership, earnings, analyst recommendations, risk and profitability.

Profitability

This table compares Potbelly Corporation and Ruby Tuesday’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly Corporation 1.03% 8.68% 6.15%
Ruby Tuesday -11.15% -5.30% -2.30%

Institutional & Insider Ownership

72.8% of Potbelly Corporation shares are owned by institutional investors. Comparatively, 76.1% of Ruby Tuesday shares are owned by institutional investors. 9.6% of Potbelly Corporation shares are owned by insiders. Comparatively, 4.8% of Ruby Tuesday shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk and Volatility

Potbelly Corporation has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500. Comparatively, Ruby Tuesday has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Potbelly Corporation and Ruby Tuesday, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly Corporation 0 3 1 0 2.25
Ruby Tuesday 0 0 0 0 N/A

Potbelly Corporation presently has a consensus target price of $13.67, suggesting a potential upside of 14.37%. Given Potbelly Corporation’s higher probable upside, research analysts plainly believe Potbelly Corporation is more favorable than Ruby Tuesday.

Valuation and Earnings

This table compares Potbelly Corporation and Ruby Tuesday’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Potbelly Corporation $415.98 million 0.72 $39.72 million $0.17 70.30
Ruby Tuesday $951.97 million 0.14 $29.49 million ($1.76) -1.22

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

Summary

Potbelly Corporation beats Ruby Tuesday on 10 of the 12 factors compared between the two stocks.

Potbelly Corporation Company Profile

Potbelly Corporation owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. As of December 25, 2016, the Company operated Potbelly Sandwich Works sandwich shops in 29 states and the District of Columbia. As of December 25, 2016, the Company had a domestic base of 441 shops in 29 states and the District of Columbia. Of these, the company operated 411 shops, and franchisees operated 30 shops, as of December 25, 2016. As of December 25, 2016, the Company had 13 international franchised shops, which included 11 shops in the Middle East, a shop in the United Kingdom and a shop in Canada. As of December 25, 2016, the Company had domestic franchise shops in Arkansas, Iowa, Illinois, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Virginia.

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.

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