Starbucks (NASDAQ:SBUX) vs. Texas Roadhouse (NASDAQ:TXRH) Head-To-Head Review

Starbucks (NASDAQ:SBUX) and Texas Roadhouse (NASDAQ:TXRH) are both large-cap retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, earnings, risk, valuation, analyst recommendations, profitability and institutional ownership.

Profitability

This table compares Starbucks and Texas Roadhouse’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Starbucks	7.18%	-36.23%	8.51%
Texas Roadhouse	7.72%	31.52%	13.96%

Valuation and Earnings

This table compares Starbucks and Texas Roadhouse”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starbucks	$36.18 billion	2.74	$3.76 billion	$2.32	37.59
Texas Roadhouse	$5.37 billion	2.16	$433.59 million	$6.55	26.61

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

Dividends

Starbucks pays an annual dividend of $2.44 per share and has a dividend yield of 2.8%. Texas Roadhouse pays an annual dividend of $2.72 per share and has a dividend yield of 1.6%. Starbucks pays out 105.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Texas Roadhouse pays out 41.5% of its earnings in the form of a dividend. Starbucks has increased its dividend for 15 consecutive years and Texas Roadhouse has increased its dividend for 6 consecutive years. Starbucks is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Starbucks has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, Texas Roadhouse has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Starbucks and Texas Roadhouse, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starbucks	2	10	14	1	2.52
Texas Roadhouse	1	10	10	1	2.50

Starbucks currently has a consensus target price of $101.12, indicating a potential upside of 15.93%. Texas Roadhouse has a consensus target price of $196.16, indicating a potential upside of 12.53%. Given Starbucks’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Starbucks is more favorable than Texas Roadhouse.

Institutional and Insider Ownership

72.3% of Starbucks shares are owned by institutional investors. Comparatively, 94.8% of Texas Roadhouse shares are owned by institutional investors. 0.1% of Starbucks shares are owned by insiders. Comparatively, 0.5% of Texas Roadhouse shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Starbucks beats Texas Roadhouse on 10 of the 17 factors compared between the two stocks.

About Starbucks

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. The company offers its products under the Starbucks Coffee, Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve, and Princi brands. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.

About Texas Roadhouse

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. It also operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers names in 49 states and ten internationally. Texas Roadhouse, Inc. was founded in 1993 and is based in Louisville, Kentucky.