Critical Review: Brinker International (NYSE:EAT) versus Rave Restaurant Group (NASDAQ:RAVE)

Rave Restaurant Group (NASDAQ:RAVE) and Brinker International (NYSE:EAT) are both consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, risk, dividends and earnings.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Rave Restaurant Group and Brinker International, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rave Restaurant Group	0	1	0	0	2.00
Brinker International	0	7	16	1	2.75

Brinker International has a consensus target price of $241.80, indicating a potential upside of 22.56%. Given Brinker International’s stronger consensus rating and higher possible upside, analysts plainly believe Brinker International is more favorable than Rave Restaurant Group.

Insider & Institutional Ownership

15.1% of Rave Restaurant Group shares are held by institutional investors. 28.0% of Rave Restaurant Group shares are held by insiders. Comparatively, 1.4% of Brinker International shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Rave Restaurant Group and Brinker International”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rave Restaurant Group	$12.04 million	3.33	$2.70 million	$0.21	13.43
Brinker International	$5.81 billion	1.42	$487.00 million	$10.89	18.12

Brinker International has higher revenue and earnings than Rave Restaurant Group. Rave Restaurant Group is trading at a lower price-to-earnings ratio than Brinker International, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Rave Restaurant Group has a beta of 0.43, indicating that its share price is 57% less volatile than the S&P 500. Comparatively, Brinker International has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500.

Profitability

This table compares Rave Restaurant Group and Brinker International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rave Restaurant Group	23.19%	19.22%	16.81%
Brinker International	8.39%	122.35%	17.42%

Summary

Brinker International beats Rave Restaurant Group on 11 of the 15 factors compared between the two stocks.

About Rave Restaurant Group

Rave Restaurant Group, Inc., together with its subsidiaries, engages in the operation and franchising of pizza buffet, delivery/carry-out (delco), and express restaurants under the Pizza Inn and Pie Five trademarks in the United States and internationally. The company operates through three segments: Pizza Inn Franchising, Pie Five Franchising, and Company-Owned Restaurants. Its buffet restaurants are located in free standing buildings or strip centers in retail developments that offer dine-in, carryout, and catering services, as well as delivery services. The company’s delco restaurants provide delivery and carryout services and are located in shopping centers or other in-line retail developments. Its Express restaurants serve customers through various non-traditional points of sale and are located in convenience stores, food courts, college campuses, airport terminals, travel plazas, athletic facilities, or other commercial facilities. The company’s Pizza Inn Express restaurants serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express, located at production-oriented facilities. In addition, it operates and franchises fast casual restaurants under the Pie Five Pizza Company or Pie Five trademarks. The company was formerly known as Pizza Inn Holdings, Inc. and changed its name to Rave Restaurant Group, Inc. in January 2015. Rave Restaurant Group, Inc. was founded in 1958 and is based in The Colony, Texas.

About Brinker International

Brinker International, Inc., together with its subsidiaries, engages in the ownership, development, operation, and franchising of casual dining restaurants in the United States and internationally. It operates and franchises Chili's Grill & Bar and Maggiano's Little Italy restaurant brands. The company also operates virtual brands, It's Just Wings. Brinker International, Inc. was founded in 1975 and is headquartered in Dallas, Texas.