Potbelly Corporation (NASDAQ: PBPB) and DineEquity (NYSE:DIN) are both small-cap retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, profitability, risk, valuation, earnings, institutional ownership and dividends.

Risk and Volatility

Potbelly Corporation has a beta of 0.9, meaning that its share price is 10% less volatile than the S&P 500. Comparatively, DineEquity has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500.

Institutional and Insider Ownership

72.8% of Potbelly Corporation shares are owned by institutional investors. Comparatively, 92.0% of DineEquity shares are owned by institutional investors. 9.6% of Potbelly Corporation shares are owned by insiders. Comparatively, 2.2% of DineEquity shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Potbelly Corporation and DineEquity’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly Corporation 1.03% 8.68% 6.15%
DineEquity 13.02% 38.34% 4.35%

Dividends

DineEquity pays an annual dividend of $3.88 per share and has a dividend yield of 9.0%. Potbelly Corporation does not pay a dividend. DineEquity pays out 86.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. DineEquity has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Potbelly Corporation and DineEquity, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly Corporation 0 3 1 0 2.25
DineEquity 0 4 3 0 2.43

Potbelly Corporation currently has a consensus target price of $13.67, suggesting a potential upside of 10.22%. DineEquity has a consensus target price of $57.00, suggesting a potential upside of 32.62%. Given DineEquity’s stronger consensus rating and higher possible upside, analysts clearly believe DineEquity is more favorable than Potbelly Corporation.

Valuation and Earnings

This table compares Potbelly Corporation and DineEquity’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Potbelly Corporation $415.98 million 0.75 $39.72 million $0.17 72.95
DineEquity $621.56 million 1.24 $234.57 million $4.48 9.59

DineEquity has higher revenue and earnings than Potbelly Corporation. DineEquity is trading at a lower price-to-earnings ratio than Potbelly Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

DineEquity beats Potbelly Corporation on 12 of the 17 factors compared between the two stocks.

Potbelly Corporation Company Profile

Potbelly Corporation owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. As of December 25, 2016, the Company operated Potbelly Sandwich Works sandwich shops in 29 states and the District of Columbia. As of December 25, 2016, the Company had a domestic base of 441 shops in 29 states and the District of Columbia. Of these, the company operated 411 shops, and franchisees operated 30 shops, as of December 25, 2016. As of December 25, 2016, the Company had 13 international franchised shops, which included 11 shops in the Middle East, a shop in the United Kingdom and a shop in Canada. As of December 25, 2016, the Company had domestic franchise shops in Arkansas, Iowa, Illinois, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Virginia.

DineEquity Company Profile

DineEquity, Inc., through its subsidiaries, owns and franchises the Applebee’s Neighborhood Grill & Bar (Applebee’s) concept in the bar and grill segment within the casual dining category of the restaurant industry, and owns, franchises and operates the International House of Pancakes (IHOP) concept in the family dining category of the restaurant industry. It operates through four segments: Franchise operations, Rental operations, Company restaurant operations and Financing operations. As of December 31, 2016, it had 3,749 restaurants. Applebee’s menu features a selection of grill and bar fare, such as appetizers, bar snacks, burgers, classic entrees and lighter fare, as well as cocktails, beers and desserts. As of December 31, 2016, IHOP franchise and area license restaurants were located in all 50 states within the United States, in the District of Columbia, in three United States territories and in 10 countries outside of the United States.

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