Wendy’s (NASDAQ:WEN) versus Rave Restaurant Group (NASDAQ:RAVE) Financial Contrast

Rave Restaurant Group (NASDAQ:RAVE) and Wendy’s (NASDAQ:WEN) are both small-cap retail/wholesale companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, risk, institutional ownership, earnings, profitability, valuation and analyst recommendations.

Volatility and Risk

Rave Restaurant Group has a beta of 0.37, indicating that its stock price is 63% less volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500.

Institutional and Insider Ownership

15.1% of Rave Restaurant Group shares are owned by institutional investors. Comparatively, 86.0% of Wendy’s shares are owned by institutional investors. 28.0% of Rave Restaurant Group shares are owned by company insiders. Comparatively, 17.0% of Wendy’s shares are owned 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.

Analyst Ratings

This is a breakdown of current ratings and price targets for Rave Restaurant Group and Wendy’s, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rave Restaurant Group	0	0	1	0	3.00
Wendy’s	5	15	4	1	2.04

Wendy’s has a consensus price target of $9.00, suggesting a potential upside of 30.81%. Given Wendy’s’ higher possible upside, analysts clearly believe Wendy’s is more favorable than Rave Restaurant Group.

Earnings and Valuation

This table compares Rave Restaurant Group and Wendy’s”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	3.00	$2.70 million	$0.20	12.70
Wendy’s	$2.18 billion	0.60	$165.07 million	$0.85	8.09

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Rave Restaurant Group	23.04%	19.70%	17.07%
Wendy’s	7.58%	145.93%	3.47%

Summary

Wendy’s beats Rave Restaurant Group on 9 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 Wendy’s

The Wendy’s Co. engages in operating, developing, and franchising a system of quick-service restaurants. It operates through the following segments: Wendy’s U.S., Wendy’s International, and Global Real Estate and Development. The Wendy’s U.S. segment includes the operation and franchising of Wendy’s restaurants in the U.S. The Wendy’s International segment is involved in the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. The Global Real Estate and Development segment focuses on real estate activity for owned sites and sites leased from third parties. The company was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH.