Critical Analysis: Papa John’s International (PZZA) vs. Diversified Restaurant (SAUC)
Papa John’s International (NASDAQ: PZZA) and Diversified Restaurant (NASDAQ:SAUC) are both retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.
Institutional and Insider Ownership
84.2% of Papa John’s International shares are held by institutional investors. Comparatively, 8.7% of Diversified Restaurant shares are held by institutional investors. 27.7% of Papa John’s International shares are held by company insiders. Comparatively, 49.6% of Diversified Restaurant shares are held by company 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.
Papa John’s International has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500. Comparatively, Diversified Restaurant has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.
Earnings & Valuation
This table compares Papa John’s International and Diversified Restaurant’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Papa John’s International||$1.71 billion||1.18||$102.82 million||$2.90||19.85|
|Diversified Restaurant||$166.52 million||0.24||-$6.00 million||($0.19)||-7.89|
Papa John’s International has higher revenue and earnings than Diversified Restaurant. Diversified Restaurant is trading at a lower price-to-earnings ratio than Papa John’s International, indicating that it is currently the more affordable of the two stocks.
This is a summary of recent ratings and target prices for Papa John’s International and Diversified Restaurant, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Papa John’s International||0||6||3||0||2.33|
Papa John’s International presently has a consensus price target of $79.25, indicating a potential upside of 37.66%. Diversified Restaurant has a consensus price target of $3.50, indicating a potential upside of 133.33%. Given Diversified Restaurant’s stronger consensus rating and higher probable upside, analysts plainly believe Diversified Restaurant is more favorable than Papa John’s International.
This table compares Papa John’s International and Diversified Restaurant’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Papa John’s International||6.12%||4,321.08%||19.07%|
Papa John’s International pays an annual dividend of $0.90 per share and has a dividend yield of 1.6%. Diversified Restaurant does not pay a dividend. Papa John’s International pays out 31.0% of its earnings in the form of a dividend.
Papa John’s International beats Diversified Restaurant on 10 of the 16 factors compared between the two stocks.
About Papa John’s International
Papa John’s International, Inc. (Papa John’s) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark Papa John’s. The Company operates through five segments: domestic Company-owned restaurants, North America commissaries, North America franchising, international operations and all other business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. International franchisees are defined as all franchise operations outside of the United States and Canada. As of December 25, 2016, there were 5,097 Papa John’s restaurants in operation, consisting of 744 Company-owned and 4,353 franchised restaurants operating domestically in all 50 states and in 45 countries and territories. It offers pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages.
About Diversified Restaurant
Diversified Restaurant Holdings, Inc. (DRH) is a restaurant company. The Company is a franchisee of Buffalo Wild Wings (BWW).As of September 25, 2016, the Company operated 64 BWW restaurants, which are located in Michigan, Florida, Missouri, Illinois and Indiana. The BWW restaurants feature a range of menu items with a multimedia social environment, a bar and an open layout designed to create a dining experience for sports fans and families. Its guests have the option of watching various sporting events on projection screens or televisions. As of September 25, 2016, the BWW menu specialized in 21 sauces and seasonings with flavors ranging from Sweet BBQ to Blazin’. As of September 25, 2016, the restaurants offered 12 to 30 domestic and imported beers on tap, including several local or regional microbrews and a selection of bottled beer, wine and liquor.
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