Potbelly Corporation (PBPB) & Diversified Restaurant Holdings (SAUC) Critical Survey

Potbelly Corporation (NASDAQ: PBPB) and Diversified Restaurant Holdings (NASDAQ:SAUC) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, earnings, risk, valuation, profitability, institutional ownership and dividends.

Analyst Ratings

This is a summary of recent recommendations and price targets for Potbelly Corporation and Diversified Restaurant Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly Corporation 0 2 0 0 2.00
Diversified Restaurant Holdings 0 0 1 0 3.00

Potbelly Corporation currently has a consensus price target of $11.00, indicating a potential upside of 0.00%. Diversified Restaurant Holdings has a consensus price target of $3.50, indicating a potential upside of 58.37%. Given Diversified Restaurant Holdings’ stronger consensus rating and higher possible upside, analysts plainly believe Diversified Restaurant Holdings is more favorable than Potbelly Corporation.

Profitability

This table compares Potbelly Corporation and Diversified Restaurant Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly Corporation 1.03% 8.68% 6.15%
Diversified Restaurant Holdings -3.39% -60.83% -0.51%

Volatility and Risk

Potbelly Corporation has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500. Comparatively, Diversified Restaurant Holdings has a beta of 1.37, suggesting that its stock price is 37% more volatile than the S&P 500.

Earnings & Valuation

This table compares Potbelly Corporation and Diversified Restaurant Holdings’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Potbelly Corporation $415.98 million 0.66 $39.72 million $0.17 64.71
Diversified Restaurant Holdings $166.70 million 0.35 $20.34 million ($0.22) -10.05

Potbelly Corporation has higher revenue and earnings than Diversified Restaurant Holdings. Diversified Restaurant Holdings is trading at a lower price-to-earnings ratio than Potbelly Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

72.8% of Potbelly Corporation shares are held by institutional investors. Comparatively, 11.1% of Diversified Restaurant Holdings shares are held by institutional investors. 9.6% of Potbelly Corporation shares are held by company insiders. Comparatively, 48.2% of Diversified Restaurant Holdings shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Potbelly Corporation beats Diversified Restaurant Holdings on 8 of the 13 factors compared between the two stocks.

About Potbelly Corporation

Potbelly Corporation owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. As of December 25, 2016, the Company operated Potbelly Sandwich Works sandwich shops in 29 states and the District of Columbia. As of December 25, 2016, the Company had a domestic base of 441 shops in 29 states and the District of Columbia. Of these, the company operated 411 shops, and franchisees operated 30 shops, as of December 25, 2016. As of December 25, 2016, the Company had 13 international franchised shops, which included 11 shops in the Middle East, a shop in the United Kingdom and a shop in Canada. As of December 25, 2016, the Company had domestic franchise shops in Arkansas, Iowa, Illinois, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Virginia.

About Diversified Restaurant Holdings

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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