Comparing Rocky Mountain Chocolate Factory (NASDAQ:RMCF) and Starbucks (NASDAQ:SBUX)

Rocky Mountain Chocolate Factory (NASDAQ:RMCF) and Starbucks (NASDAQ:SBUX) are both retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, analyst recommendations, earnings, dividends, risk, institutional ownership and valuation.

Risk and Volatility

Rocky Mountain Chocolate Factory has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500. Comparatively, Starbucks has a beta of 0.98, indicating that its share price is 2% less volatile than the S&P 500.

Profitability

This table compares Rocky Mountain Chocolate Factory and Starbucks’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rocky Mountain Chocolate Factory	-16.58%	-75.71%	-21.90%
Starbucks	3.89%	-29.24%	7.42%

Insider and Institutional Ownership

50.3% of Rocky Mountain Chocolate Factory shares are owned by institutional investors. Comparatively, 72.3% of Starbucks shares are owned by institutional investors. 42.2% of Rocky Mountain Chocolate Factory shares are owned by insiders. Comparatively, 0.0% of Starbucks shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Rocky Mountain Chocolate Factory and Starbucks, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rocky Mountain Chocolate Factory	1	0	0	0	1.00
Starbucks	2	10	20	1	2.61

Starbucks has a consensus price target of $107.48, indicating a potential upside of 12.80%. Given Starbucks’ stronger consensus rating and higher probable upside, analysts clearly believe Starbucks is more favorable than Rocky Mountain Chocolate Factory.

Valuation and Earnings

This table compares Rocky Mountain Chocolate Factory and Starbucks”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rocky Mountain Chocolate Factory	$27.50 million	0.57	-$4.56 million	($0.53)	-3.17
Starbucks	$37.18 billion	2.92	$1.86 billion	$1.32	72.19

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

Summary

Starbucks beats Rocky Mountain Chocolate Factory on 14 of the 15 factors compared between the two stocks.

About Rocky Mountain Chocolate Factory

Rocky Mountain Chocolate Factory, Inc., together with its subsidiaries, operates as a confectionery franchisor, manufacturer, and retail operator. It operates through Franchising, Manufacturing, Retail Stores, and Other segments. The company produces approximately 400 chocolate candies and other confectionery products, including clusters, caramels, creams, toffees, mints, and truffles; and offers 15 varieties of caramel apples and other products that are prepared in individual stores, as well as provides ice cream, coffee, and other sundries. Rocky Mountain Chocolate Factory, Inc. was founded in 1981 and is headquartered in Durango, Colorado.

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.