Zoe’s Kitchen (NYSE: ZOES) and The Habit Restaurants (NASDAQ:HABT) are both small-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, institutional ownership, risk, dividends, analyst recommendations and profitability.

Valuation and Earnings

This table compares Zoe’s Kitchen and The Habit Restaurants’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Zoe’s Kitchen $294.14 million 0.83 $22.57 million ($0.02) -627.50
The Habit Restaurants $307.71 million 0.81 $29.44 million $0.25 48.90

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

Insider & Institutional Ownership

73.8% of The Habit Restaurants shares are owned by institutional investors. 3.0% of Zoe’s Kitchen shares are owned by company insiders. Comparatively, 5.8% of The Habit Restaurants shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

Zoe’s Kitchen has a beta of 0.34, indicating that its share price is 66% less volatile than the S&P 500. Comparatively, The Habit Restaurants has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500.

Profitability

This table compares Zoe’s Kitchen and The Habit Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Zoe’s Kitchen -0.07% -0.27% -0.16%
The Habit Restaurants 1.64% 4.97% 2.16%

Analyst Ratings

This is a breakdown of current recommendations for Zoe’s Kitchen and The Habit Restaurants, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Zoe’s Kitchen 1 6 3 0 2.20
The Habit Restaurants 0 3 3 0 2.50

Zoe’s Kitchen presently has a consensus target price of $17.55, indicating a potential upside of 39.84%. The Habit Restaurants has a consensus target price of $17.50, indicating a potential upside of 43.15%. Given The Habit Restaurants’ stronger consensus rating and higher probable upside, analysts plainly believe The Habit Restaurants is more favorable than Zoe’s Kitchen.

Summary

The Habit Restaurants beats Zoe’s Kitchen on 11 of the 12 factors compared between the two stocks.

Zoe’s Kitchen Company Profile

Zoe’s Kitchen, Inc. develops and operates fast-casual restaurants serving a menu of fresh, wholesome, Mediterranean-inspired dishes delivered with Southern hospitality. The Company’s menu offers meals made from scratch using produce, proteins and other ingredients, including its appetizers, soups, salads and kabobs. Its food, including both hot and cold items, is suited for catering to a range of business and social occasions. It caters to a range of dietary needs by offering vegetarian, vegan, gluten-free and its calorie conscious, Simply 500 menu selections. Its party packs serve groups of approximately 10 and are each filled with their own combination of fresh fruits, veggies, proteins and grains. The Company serves dishes for various occasions, such as Guilt-Free Girls Night, Game Day Goodies, Shower Sensations and Kids’ Party Pack. As of December 26, 2016, it had operated 201 Company-owned restaurants and three franchise restaurants in 20 states across the United States.

The Habit Restaurants Company Profile

The Habit Restaurants, Inc. (Habit Burger Grill) is a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. It operates a range of restaurant formats, including end-cap, free-standing, inline, end-cap drive-thru and traditional stand-alone drive-in, primarily within suburban shopping centers and retail settings. As of December 27, 2016, the Company had 172 locations in 15 markets in 10 states and the United Arab Emirates, including franchised/licensed locations (excluding six licensed locations in Santa Barbara County, California).

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