Denny’s (NASDAQ: DENN) 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 dividends, institutional ownership, analyst recommendations, profitability, valuation, earnings and risk.

Insider & Institutional Ownership

91.5% of Denny’s shares are held by institutional investors. Comparatively, 32.4% of Good Times Restaurants shares are held by institutional investors. 5.2% of Denny’s shares are held by insiders. Comparatively, 8.4% of Good Times Restaurants shares are held by 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.

Volatility and Risk

Denny’s has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500. Comparatively, Good Times Restaurants has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Denny’s and Good Times Restaurants, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Denny’s 0 2 1 0 2.33
Good Times Restaurants 0 0 1 0 3.00

Denny’s currently has a consensus price target of $12.67, suggesting a potential downside of 4.55%. Good Times Restaurants has a consensus price target of $6.00, suggesting a potential upside of 144.90%. Given Good Times Restaurants’ stronger consensus rating and higher probable upside, analysts clearly believe Good Times Restaurants is more favorable than Denny’s.

Profitability

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

Net Margins Return on Equity Return on Assets
Denny’s 7.21% -52.30% 13.31%
Good Times Restaurants -2.25% -4.44% -3.35%

Earnings and Valuation

This table compares Denny’s and Good Times Restaurants’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Denny’s $506.95 million 1.71 $19.40 million $0.52 25.52
Good Times Restaurants $64.44 million 0.47 -$1.32 million ($0.14) -17.50

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

Summary

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

About Denny’s

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 Good Times Restaurants

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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