Reviewing FAT Brands (NASDAQ:FATBB) and Starbucks (NASDAQ:SBUX)

Starbucks (NASDAQ:SBUX) and FAT Brands (NASDAQ:FATBB) are both retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, profitability, analyst recommendations and institutional ownership.

Profitability

This table compares Starbucks and FAT Brands’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Starbucks	4.99%	-31.32%	7.48%
FAT Brands	-39.33%	N/A	-17.57%

Volatility & Risk

Starbucks has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500. Comparatively, FAT Brands has a beta of 1.02, suggesting that its share price is 2% more volatile than the S&P 500.

Valuation & Earnings

This table compares Starbucks and FAT Brands”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starbucks	$37.18 billion	2.72	$1.86 billion	$1.64	54.20
FAT Brands	$574.14 million	0.04	-$189.85 million	($13.35)	-0.09

Starbucks has higher revenue and earnings than FAT Brands. FAT Brands is trading at a lower price-to-earnings ratio than Starbucks, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

72.3% of Starbucks shares are owned by institutional investors. 0.1% of Starbucks shares are owned by company insiders. Comparatively, 59.9% of FAT Brands shares are owned by company 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.

Dividends

Starbucks pays an annual dividend of $2.48 per share and has a dividend yield of 2.8%. FAT Brands pays an annual dividend of $0.14 per share and has a dividend yield of 11.4%. Starbucks pays out 151.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FAT Brands pays out -1.0% of its earnings in the form of a dividend. Starbucks has increased its dividend for 15 consecutive years. FAT Brands is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Starbucks and FAT Brands, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starbucks	3	10	15	1	2.48
FAT Brands	1	0	0	0	1.00

Starbucks presently has a consensus price target of $102.12, indicating a potential upside of 14.90%. Given Starbucks’ stronger consensus rating and higher possible upside, analysts clearly believe Starbucks is more favorable than FAT Brands.

Summary

Starbucks beats FAT Brands on 13 of the 18 factors compared between the two stocks.

About Starbucks

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. The company offers its products under the Starbucks Coffee, Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve, and Princi brands. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.

About FAT Brands

FAT Brands Inc., a multi-brand restaurant franchising company, acquires, develops, markets, and manages quick service, fast casual, casual dining, and polished casual dining restaurant concepts worldwide. It owns restaurant brands, including Round Table Pizza, Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick, Pretzelmaker, Fazoli's, Fatburger, Johnny Rockets, Elevation Burger, Yalla Mediterranean, Buffalo's Cafe and Buffalo's Express, Hurricane Grill & Wings, Ponderosa Steakhouse/Bonanza Steakhouse, Native Grill & Wings, Smokey Bones, and Twin Peaks. The company was incorporated in 2017 and is headquartered in Beverly Hills, California. FAT Brands Inc. is a subsidiary of Fog Cutter Holdings, LLC.