Head-To-Head Survey: Habit Restaurants (HABT) vs. Luby’s (LUB)

Habit Restaurants (NASDAQ: HABT) and Luby’s (NYSE:LUB) are both small-cap cyclical consumer goods & services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Earnings & Valuation

This table compares Habit Restaurants and Luby’s’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Habit Restaurants $283.81 million 0.93 $4.66 million $0.23 44.13
Luby’s $376.03 million 0.21 -$23.26 million ($0.79) -3.48

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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Habit Restaurants and Luby’s, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Habit Restaurants 0 5 3 0 2.38
Luby’s 0 0 0 0 N/A

Habit Restaurants currently has a consensus target price of $15.94, indicating a potential upside of 57.02%. Given Habit Restaurants’ higher probable upside, analysts clearly believe Habit Restaurants is more favorable than Luby’s.

Profitability

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

Net Margins Return on Equity Return on Assets
Habit Restaurants 1.46% 4.09% 1.75%
Luby’s -6.19% -6.47% -4.08%

Volatility and Risk

Habit Restaurants has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500. Comparatively, Luby’s has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500.

Institutional and Insider Ownership

76.3% of Habit Restaurants shares are held by institutional investors. Comparatively, 41.2% of Luby’s shares are held by institutional investors. 16.1% of Habit Restaurants shares are held by company insiders. Comparatively, 35.2% of Luby’s shares are held by company 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.

Summary

Habit Restaurants beats Luby’s on 10 of the 12 factors compared between the two stocks.

About Habit Restaurants

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).

About Luby’s

Luby’s, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

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