Head-To-Head Survey: Diversified Restaurant (SAUC) versus Texas Roadhouse (TXRH)

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Diversified Restaurant (NASDAQ: TXRH) and Texas Roadhouse (NASDAQ:TXRH) are both retail/wholesale companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, earnings, profitability, risk and dividends.

Analyst Recommendations

This is a summary of recent ratings and target prices for Diversified Restaurant and Texas Roadhouse, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diversified Restaurant 0 0 0 0 N/A
Texas Roadhouse 3 8 8 0 2.26

Texas Roadhouse has a consensus price target of $63.43, indicating a potential downside of 15.62%. Given Texas Roadhouse’s higher possible upside, analysts plainly believe Texas Roadhouse is more favorable than Diversified Restaurant.

Earnings and Valuation

This table compares Diversified Restaurant and Texas Roadhouse’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Diversified Restaurant $165.46 million 0.24 -$20.45 million ($0.05) -24.00
Texas Roadhouse $2.22 billion 2.42 $131.52 million $1.97 38.16

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

Insider & Institutional Ownership

7.7% of Diversified Restaurant shares are held by institutional investors. Comparatively, 91.5% of Texas Roadhouse shares are held by institutional investors. 48.2% of Diversified Restaurant shares are held by company insiders. Comparatively, 5.9% of Texas Roadhouse shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Texas Roadhouse pays an annual dividend of $1.00 per share and has a dividend yield of 1.3%. Diversified Restaurant does not pay a dividend. Texas Roadhouse pays out 50.8% of its earnings in the form of a dividend. Texas Roadhouse has raised its dividend for 7 consecutive years.

Profitability

This table compares Diversified Restaurant and Texas Roadhouse’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Diversified Restaurant -13.84% N/A -2.47%
Texas Roadhouse 6.76% 18.15% 12.19%

Risk and Volatility

Diversified Restaurant has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500. Comparatively, Texas Roadhouse has a beta of 0.63, suggesting that its stock price is 37% less volatile than the S&P 500.

Summary

Texas Roadhouse beats Diversified Restaurant on 13 of the 16 factors compared between the two stocks.

About Diversified Restaurant

Diversified Restaurant Holdings, Inc., a restaurant company, operates Buffalo Wild Wings franchised restaurants in the United States. The company primarily offers fresh bone-in chicken wings, frozen boneless chicken, and potatoes. As of March 8, 2018, it operated 65 franchised restaurants in Florida, Illinois, Indiana, Michigan, and Missouri. The company was founded in 1999 and is headquartered in Southfield, Michigan.

About Texas Roadhouse

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. The company operates and franchises Texas Roadhouse and Bubba's 33 restaurants. As of February 20, 2018, it owned and operated approximately 550 restaurants. Texas Roadhouse, Inc. was founded in 1993 and is based in Louisville, Kentucky.

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