Critical Analysis: Denny’s Corporation (DENN) versus Starbucks Corporation (SBUX)
Denny’s Corporation (NASDAQ: DENN) and Starbucks Corporation (NASDAQ:SBUX) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, profitability, risk, analyst recommendations and dividends.
Starbucks Corporation pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. Denny’s Corporation does not pay a dividend. Starbucks Corporation pays out 50.8% of its earnings in the form of a dividend.
This table compares Denny’s Corporation and Starbucks Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Risk and Volatility
Denny’s Corporation has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500. Comparatively, Starbucks Corporation has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500.
Insider and Institutional Ownership
92.4% of Denny’s Corporation shares are held by institutional investors. Comparatively, 70.8% of Starbucks Corporation shares are held by institutional investors. 5.2% of Denny’s Corporation shares are held by insiders. Comparatively, 3.4% of Starbucks Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Valuation and Earnings
This table compares Denny’s Corporation and Starbucks Corporation’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Denny’s Corporation||$519.28 million||1.65||$91.98 million||$0.52||24.48|
|Starbucks Corporation||$22.40 billion||3.47||$5.14 billion||$1.97||27.31|
Starbucks Corporation has higher revenue and earnings than Denny’s Corporation. Denny’s Corporation is trading at a lower price-to-earnings ratio than Starbucks Corporation, indicating that it is currently the more affordable of the two stocks.
This is a summary of current ratings for Denny’s Corporation and Starbucks Corporation, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Denny’s Corporation currently has a consensus target price of $12.67, suggesting a potential downside of 0.50%. Starbucks Corporation has a consensus target price of $64.14, suggesting a potential upside of 19.20%. Given Starbucks Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Starbucks Corporation is more favorable than Denny’s Corporation.
Starbucks Corporation beats Denny’s Corporation on 14 of the 17 factors compared between the two stocks.
About Denny’s Corporation
Denny’s Corporation (Denny’s) operates a franchised full-service restaurant chain. The Company, through its subsidiary, Denny’s, Inc., owns and operates the Denny’s brand. As of December 28, 2016, the Denny’s brand consisted of 1,733 franchised, licensed and Company-operated restaurants around the world, including 1,610 restaurants in the United States and 123 international locations. As of December 28, 2016, 1,564 of its restaurants were franchised or licensed and 169 were Company-operated. In addition to its breakfast-all-day items, Denny’s offers a selection of lunch and dinner items, including burgers, sandwiches, salads and skillet entrees, along with an assortment of beverages, appetizers and desserts. The Company’s Fit Fare menu helps its guests identify items suited to their dietary needs. Most Denny’s restaurants offer special items for children and seniors. The Company has restaurant locations within travel centers, primarily with Pilot and Pilot Flying J Travel Centers.
About Starbucks Corporation
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.
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