Good Times Restaurants (NASDAQ: GTIM) and Luby’s (NYSE:LUB) are both small-cap retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Volatility and Risk

Good Times Restaurants has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500. Comparatively, Luby’s has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500.

Insider & Institutional Ownership

32.7% of Good Times Restaurants shares are owned by institutional investors. Comparatively, 42.8% of Luby’s shares are owned by institutional investors. 8.4% of Good Times Restaurants shares are owned by insiders. Comparatively, 35.2% of Luby’s shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and price targets for Good Times Restaurants and Luby’s, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Good Times Restaurants 0 0 1 0 3.00
Luby’s 0 0 0 0 N/A

Good Times Restaurants currently has a consensus price target of $6.00, indicating a potential upside of 106.90%. Given Good Times Restaurants’ higher probable upside, research analysts clearly believe Good Times Restaurants is more favorable than Luby’s.

Profitability

This table compares Good Times Restaurants and Luby’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Good Times Restaurants -2.25% -4.44% -3.35%
Luby’s -6.96% -4.97% -3.16%

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Good Times Restaurants $73.71 million 0.49 $2.12 million ($0.14) -20.71
Luby’s $387.17 million 0.20 $13.97 million ($0.92) -2.88

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

Summary

Good Times Restaurants beats Luby’s on 7 of the 12 factors compared between the two stocks.

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.

Luby’s Company Profile

Luby’s, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

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