Denny’s Corporation (NASDAQ: DENN) and Potbelly Corporation (NASDAQ:PBPB) 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, earnings, valuation, institutional ownership, risk, profitability and analyst recommendations.

Institutional & Insider Ownership

93.6% of Denny’s Corporation shares are held by institutional investors. Comparatively, 73.3% of Potbelly Corporation shares are held by institutional investors. 5.2% of Denny’s Corporation shares are held by company insiders. Comparatively, 9.6% of Potbelly Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Denny’s Corporation $506.95 million 1.63 $19.40 million $0.52 24.40
Potbelly Corporation $407.13 million 0.73 $8.21 million $0.09 133.90

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

Profitability

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

Net Margins Return on Equity Return on Assets
Denny’s Corporation 7.21% -52.30% 13.31%
Potbelly Corporation 0.54% 7.80% 5.48%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Denny’s Corporation and Potbelly Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Denny’s Corporation 0 2 1 0 2.33
Potbelly Corporation 0 3 1 0 2.25

Denny’s Corporation presently has a consensus price target of $12.67, suggesting a potential downside of 0.18%. Potbelly Corporation has a consensus price target of $13.67, suggesting a potential upside of 13.42%. Given Potbelly Corporation’s higher possible upside, analysts clearly believe Potbelly Corporation is more favorable than Denny’s Corporation.

Volatility & Risk

Denny’s Corporation has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500. Comparatively, Potbelly Corporation has a beta of 0.9, meaning that its stock price is 10% less volatile than the S&P 500.

Summary

Denny’s Corporation beats Potbelly Corporation on 8 of the 13 factors compared between the two stocks.

Denny’s Corporation Company Profile

Denny’s Corporation (Denny’s) operates a franchised full-service restaurant chain. The Company, through its subsidiary, Denny’s, Inc., owns and operates the Denny’s brand. As of December 28, 2016, the Denny’s brand consisted of 1,733 franchised, licensed and Company-operated restaurants around the world, including 1,610 restaurants in the United States and 123 international locations. As of December 28, 2016, 1,564 of its restaurants were franchised or licensed and 169 were Company-operated. In addition to its breakfast-all-day items, Denny’s offers a selection of lunch and dinner items, including burgers, sandwiches, salads and skillet entrees, along with an assortment of beverages, appetizers and desserts. The Company’s Fit Fare menu helps its guests identify items suited to their dietary needs. Most Denny’s restaurants offer special items for children and seniors. The Company has restaurant locations within travel centers, primarily with Pilot and Pilot Flying J Travel Centers.

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.

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