Dave & Buster’s Entertainment (NASDAQ:PLAY) and Nathan’s Famous (NASDAQ:NATH) 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 profitability, analyst recommendations, valuation, institutional ownership, risk, earnings and dividends.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Dave & Buster’s Entertainment and Nathan’s Famous, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dave & Buster’s Entertainment 0 9 3 0 2.25
Nathan’s Famous 0 0 0 0 N/A

Dave & Buster’s Entertainment presently has a consensus target price of $46.97, suggesting a potential upside of 18.02%. Given Dave & Buster’s Entertainment’s higher probable upside, analysts clearly believe Dave & Buster’s Entertainment is more favorable than Nathan’s Famous.

Dividends

Dave & Buster’s Entertainment pays an annual dividend of $0.64 per share and has a dividend yield of 1.6%. Nathan’s Famous pays an annual dividend of $1.40 per share and has a dividend yield of 1.9%. Dave & Buster’s Entertainment pays out 21.8% of its earnings in the form of a dividend.

Volatility and Risk

Dave & Buster’s Entertainment has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Nathan’s Famous has a beta of 0.29, suggesting that its stock price is 71% less volatile than the S&P 500.

Insider & Institutional Ownership

41.6% of Nathan’s Famous shares are held by institutional investors. 3.7% of Dave & Buster’s Entertainment shares are held by company insiders. Comparatively, 31.8% of Nathan’s Famous shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Dave & Buster’s Entertainment and Nathan’s Famous’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dave & Buster’s Entertainment 8.78% 32.64% 6.68%
Nathan’s Famous 21.59% -19.83% 15.06%

Earnings and Valuation

This table compares Dave & Buster’s Entertainment and Nathan’s Famous’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dave & Buster’s Entertainment $1.27 billion 0.97 $117.22 million $2.93 13.58
Nathan’s Famous $101.85 million 3.11 $21.49 million N/A N/A

Dave & Buster’s Entertainment has higher revenue and earnings than Nathan’s Famous.

Summary

Nathan’s Famous beats Dave & Buster’s Entertainment on 8 of the 14 factors compared between the two stocks.

About Dave & Buster’s Entertainment

Dave & Buster's Entertainment, Inc. owns and operates entertainment and dining venues for adults and families. Its venues offer a menu of entrées and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. The company operates its venues under the Dave & Buster's name. As of April 02, 2019, it owned and operated 125 venues in 39 states, Puerto Rico, and Canada. The company was founded in 1982 and is headquartered in Dallas, Texas.

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.

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