Starbucks (NASDAQ: SBUX) and Papa John’s International (NASDAQ:PZZA) are both mid-cap cyclical consumer goods & services companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Profitability

This table compares Starbucks and Papa John’s International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Starbucks 12.89% 53.34% 21.21%
Papa John’s International 6.12% 4,321.08% 19.07%

Valuation and Earnings

This table compares Starbucks and Papa John’s International’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Starbucks $22.39 billion 3.77 $2.88 billion $1.97 30.09
Papa John’s International $1.71 billion 1.17 $102.82 million $2.91 19.68

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

Dividends

Starbucks pays an annual dividend of $1.20 per share and has a dividend yield of 2.0%. Papa John’s International pays an annual dividend of $0.90 per share and has a dividend yield of 1.6%. Starbucks pays out 60.9% of its earnings in the form of a dividend. Papa John’s International pays out 30.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Starbucks and Papa John’s International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Starbucks 0 10 19 1 2.70
Papa John’s International 0 6 3 0 2.33

Starbucks presently has a consensus price target of $63.25, suggesting a potential upside of 6.70%. Papa John’s International has a consensus price target of $79.25, suggesting a potential upside of 38.38%. Given Papa John’s International’s higher probable upside, analysts plainly believe Papa John’s International is more favorable than Starbucks.

Risk & Volatility

Starbucks has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500. Comparatively, Papa John’s International has a beta of 0.4, meaning that its stock price is 60% less volatile than the S&P 500.

Insider and Institutional Ownership

71.1% of Starbucks shares are owned by institutional investors. Comparatively, 84.2% of Papa John’s International shares are owned by institutional investors. 3.4% of Starbucks shares are owned by company insiders. Comparatively, 27.7% of Papa John’s International shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Starbucks beats Papa John’s International on 11 of the 17 factors compared between the two stocks.

Starbucks Company Profile

Starbucks Corporation (Starbucks) is a roaster, marketer and retailer of coffee. As of October 2, 2016, the Company operated in 75 countries. The Company operates through four segments: Americas, which is inclusive of the United States, Canada, and Latin America; China/Asia Pacific (CAP); Europe, Middle East, and Africa (EMEA), and Channel Development. The Company’s Americas, CAP, and EMEA segments include both company-operated and licensed stores. Its Channel Development segment includes roasted whole bean and ground coffees, Tazo teas, Starbucks- and Tazo-branded single-serve products, a range of ready-to-drink beverages, such as Frappuccino, Starbucks Doubleshot and Starbucks Refreshers beverages and other branded products sold across the world through channels, such as grocery stores, warehouse clubs, specialty retailers, convenience stores and the United States foodservice accounts.

Papa John’s International Company Profile

Papa John’s International, Inc. (Papa John’s) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark Papa John’s. The Company operates through five segments: domestic Company-owned restaurants, North America commissaries, North America franchising, international operations and all other business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. International franchisees are defined as all franchise operations outside of the United States and Canada. As of December 25, 2016, there were 5,097 Papa John’s restaurants in operation, consisting of 744 Company-owned and 4,353 franchised restaurants operating domestically in all 50 states and in 45 countries and territories. It offers pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages.

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