Critical Contrast: FAT Brands (NASDAQ:FAT) vs. Domino’s Pizza (NASDAQ:DPZ)

FAT Brands (NASDAQ:FAT) and Domino’s Pizza (NASDAQ:DPZ) are both retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Profitability

This table compares FAT Brands and Domino’s Pizza’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FAT Brands	-39.33%	N/A	-17.99%
Domino’s Pizza	11.89%	-15.04%	33.66%

Dividends

FAT Brands pays an annual dividend of $0.14 per share and has a dividend yield of 86.1%. Domino’s Pizza pays an annual dividend of $7.96 per share and has a dividend yield of 2.5%. FAT Brands pays out -1.0% of its earnings in the form of a dividend. Domino’s Pizza pays out 45.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Domino’s Pizza has raised its dividend for 12 consecutive years. FAT Brands is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for FAT Brands and Domino’s Pizza, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FAT Brands	1	2	0	0	1.67
Domino’s Pizza	2	12	17	0	2.48

Domino’s Pizza has a consensus price target of $419.74, indicating a potential upside of 32.61%. Given Domino’s Pizza’s stronger consensus rating and higher possible upside, analysts clearly believe Domino’s Pizza is more favorable than FAT Brands.

Institutional and Insider Ownership

6.9% of FAT Brands shares are held by institutional investors. Comparatively, 94.6% of Domino’s Pizza shares are held by institutional investors. 15.7% of FAT Brands shares are held by company insiders. Comparatively, 0.9% of Domino’s Pizza shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

FAT Brands has a beta of 1.34, suggesting that its stock price is 34% more volatile than the S&P 500. Comparatively, Domino’s Pizza has a beta of 1.02, suggesting that its stock price is 2% more volatile than the S&P 500.

Earnings and Valuation

This table compares FAT Brands and Domino’s Pizza”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FAT Brands	$574.14 million	0.01	-$189.85 million	($13.35)	-0.01
Domino’s Pizza	$4.94 billion	2.13	$601.70 million	$17.37	18.22

Domino’s Pizza has higher revenue and earnings than FAT Brands. FAT Brands is trading at a lower price-to-earnings ratio than Domino’s Pizza, indicating that it is currently the more affordable of the two stocks.

Summary

Domino’s Pizza beats FAT Brands on 12 of the 17 factors compared between the two stocks.

About FAT Brands

FAT Brands Inc., a multi-brand restaurant franchising company, acquires, develops, markets, and manages quick service, fast casual, casual dining, and polished casual dining restaurant concepts worldwide. It owns restaurant brands, including Round Table Pizza, Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick, Pretzelmaker, Fazoli's, Fatburger, Johnny Rockets, Elevation Burger, Yalla Mediterranean, Buffalo's Cafe and Buffalo's Express, Hurricane Grill & Wings, Ponderosa Steakhouse/Bonanza Steakhouse, Native Grill & Wings, Smokey Bones, and Twin Peaks. The company was incorporated in 2017 and is headquartered in Beverly Hills, California. FAT Brands Inc. is a subsidiary of Fog Cutter Holdings, LLC.

About Domino’s Pizza

Domino’s Pizza, Inc., through its subsidiaries, operates as a pizza company in the United States and internationally. The company operates through three segments: U.S. Stores, International Franchise, and Supply Chain. It offers pizzas under the Domino’s brand name through company-owned and franchised stores. It also provides oven-baked sandwiches, pastas, boneless chicken and chicken wings, breads and dips, desserts, and soft drink products, as well as loaded tots and pepperoni stuffed cheesy breads. Domino’s Pizza, Inc. was founded in 1960 and is headquartered in Ann Arbor, Michigan.