Diversified Restaurant Holdings (NASDAQ: SAUC) and Good Times Restaurants (NASDAQ:GTIM) are both small-cap retail/wholesale companies, but which is the better stock? We will compare the two companies based on the strength of their risk, institutional ownership, profitability, earnings, valuation, analyst recommendations and dividends.

Institutional and Insider Ownership

11.1% of Diversified Restaurant Holdings shares are owned by institutional investors. Comparatively, 32.7% of Good Times Restaurants shares are owned by institutional investors. 48.2% of Diversified Restaurant Holdings shares are owned by company insiders. Comparatively, 8.4% of Good Times Restaurants shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Diversified Restaurant Holdings and Good Times Restaurants, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diversified Restaurant Holdings 0 0 1 0 3.00
Good Times Restaurants 0 0 1 0 3.00

Diversified Restaurant Holdings presently has a consensus target price of $3.50, indicating a potential upside of 51.52%. Good Times Restaurants has a consensus target price of $6.00, indicating a potential upside of 114.29%. Given Good Times Restaurants’ higher probable upside, analysts plainly believe Good Times Restaurants is more favorable than Diversified Restaurant Holdings.

Profitability

This table compares Diversified Restaurant Holdings and Good Times Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Diversified Restaurant Holdings -3.39% -60.83% -0.51%
Good Times Restaurants -2.25% -4.44% -3.35%

Volatility & Risk

Diversified Restaurant Holdings has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Good Times Restaurants has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Valuation & Earnings

This table compares Diversified Restaurant Holdings and Good Times Restaurants’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Diversified Restaurant Holdings $166.70 million 0.37 $20.34 million ($0.22) -10.50
Good Times Restaurants $73.71 million 0.47 $2.12 million ($0.14) -20.00

Diversified Restaurant Holdings has higher revenue and earnings than Good Times Restaurants. Good Times Restaurants is trading at a lower price-to-earnings ratio than Diversified Restaurant Holdings, indicating that it is currently the more affordable of the two stocks.

Summary

Good Times Restaurants beats Diversified Restaurant Holdings on 6 of the 11 factors compared between the two stocks.

Diversified Restaurant Holdings Company Profile

Diversified Restaurant Holdings, Inc. (DRH) is a restaurant company. The Company is a franchisee of Buffalo Wild Wings (BWW).As of September 25, 2016, the Company operated 64 BWW restaurants, which are located in Michigan, Florida, Missouri, Illinois and Indiana. The BWW restaurants feature a range of menu items with a multimedia social environment, a bar and an open layout designed to create a dining experience for sports fans and families. Its guests have the option of watching various sporting events on projection screens or televisions. As of September 25, 2016, the BWW menu specialized in 21 sauces and seasonings with flavors ranging from Sweet BBQ to Blazin’. As of September 25, 2016, the restaurants offered 12 to 30 domestic and imported beers on tap, including several local or regional microbrews and a selection of bottled beer, wine and liquor.

Good Times Restaurants Company Profile

Good Times Restaurants Inc. operates and franchises Good Times Burgers & Frozen Custard (Good Times) restaurants and Bad Daddy’s Burger Bar concept (Bad Daddy’s). The Company operates through two segments: Good Times Burgers and Frozen Custard restaurants, and Bad Daddy’s Burger Bar restaurants. Good Times is a quick service restaurant concept. The menu of a Good Times restaurant includes hamburgers, cheeseburgers, chicken sandwiches, French fries, onion rings, soft drinks and frozen custard products. Its breakfast menu includes breakfast burritos, orange juice and coffee. Bad Daddy’s operates in the burger casual dining sector and is chef driven, full service, full bar concept. Its menu consists of burgers, salads, sandwiches and appetizers. Its bar focuses on local, craft microbrew beers and specialty cocktails. The Company operates through its subsidiaries, Good Times Drive Thru, Inc., BD of Colorado, LLC, Bad Daddy’s Franchise Development, LLC and Bad Daddy’s International, LLC.

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