Reviewing The Habit Restaurants (HABT) & DineEquity (DIN)

The Habit Restaurants (NASDAQ: HABT) and DineEquity (NYSE:DIN) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Volatility and Risk

The Habit Restaurants has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500. Comparatively, DineEquity has a beta of 0.4, suggesting that its stock price is 60% less volatile than the S&P 500.

Profitability

This table compares The Habit Restaurants and DineEquity’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Habit Restaurants 1.64% 4.97% 2.16%
DineEquity 13.02% 38.34% 4.35%

Insider and Institutional Ownership

94.5% of The Habit Restaurants shares are owned by institutional investors. Comparatively, 92.0% of DineEquity shares are owned by institutional investors. 5.8% of The Habit Restaurants shares are owned by insiders. Comparatively, 2.2% of DineEquity shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares The Habit Restaurants and DineEquity’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
The Habit Restaurants $307.71 million 0.85 $29.44 million $0.25 51.20
DineEquity $621.56 million 1.10 $234.57 million $4.48 8.50

DineEquity has higher revenue and earnings than The Habit Restaurants. DineEquity is trading at a lower price-to-earnings ratio than The Habit Restaurants, indicating that it is currently the more affordable of the two stocks.

Dividends

DineEquity pays an annual dividend of $3.88 per share and has a dividend yield of 10.2%. The Habit Restaurants does not pay a dividend. DineEquity pays out 86.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. The Habit Restaurants has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings for The Habit Restaurants and DineEquity, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Habit Restaurants 0 2 4 0 2.67
DineEquity 0 4 3 0 2.43

The Habit Restaurants currently has a consensus price target of $19.70, suggesting a potential upside of 53.91%. DineEquity has a consensus price target of $57.00, suggesting a potential upside of 49.68%. Given The Habit Restaurants’ stronger consensus rating and higher probable upside, equities analysts plainly believe The Habit Restaurants is more favorable than DineEquity.

Summary

The Habit Restaurants beats DineEquity on 9 of the 17 factors compared between the two stocks.

The Habit Restaurants Company Profile

The Habit Restaurants, Inc. (Habit Burger Grill) is a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. It operates a range of restaurant formats, including end-cap, free-standing, inline, end-cap drive-thru and traditional stand-alone drive-in, primarily within suburban shopping centers and retail settings. As of December 27, 2016, the Company had 172 locations in 15 markets in 10 states and the United Arab Emirates, including franchised/licensed locations (excluding six licensed locations in Santa Barbara County, California).

DineEquity Company Profile

DineEquity, Inc., through its subsidiaries, owns and franchises the Applebee’s Neighborhood Grill & Bar (Applebee’s) concept in the bar and grill segment within the casual dining category of the restaurant industry, and owns, franchises and operates the International House of Pancakes (IHOP) concept in the family dining category of the restaurant industry. It operates through four segments: Franchise operations, Rental operations, Company restaurant operations and Financing operations. As of December 31, 2016, it had 3,749 restaurants. Applebee’s menu features a selection of grill and bar fare, such as appetizers, bar snacks, burgers, classic entrees and lighter fare, as well as cocktails, beers and desserts. As of December 31, 2016, IHOP franchise and area license restaurants were located in all 50 states within the United States, in the District of Columbia, in three United States territories and in 10 countries outside of the United States.

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