Contrasting Rave Restaurant Group (NASDAQ:RAVE) and Arcos Dorados (NYSE:ARCO)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Rave Restaurant Group	23.19%	19.22%	16.81%
Arcos Dorados	4.86%	10.47%	2.06%

Institutional and Insider Ownership

15.1% of Rave Restaurant Group shares are owned by institutional investors. Comparatively, 55.9% of Arcos Dorados shares are owned by institutional investors. 28.0% of Rave Restaurant Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Rave Restaurant Group and Arcos Dorados”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rave Restaurant Group	$12.04 million	3.73	$2.70 million	$0.21	15.05
Arcos Dorados	$4.68 billion	0.38	$212.12 million	$1.11	7.55

Arcos Dorados has higher revenue and earnings than Rave Restaurant Group. Arcos Dorados 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.

Volatility & Risk

Rave Restaurant Group has a beta of 0.41, meaning that its stock price is 59% less volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 0.46, meaning that its stock price is 54% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Rave Restaurant Group and Arcos Dorados, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rave Restaurant Group	0	1	0	0	2.00
Arcos Dorados	0	3	2	0	2.40

Arcos Dorados has a consensus price target of $8.70, indicating a potential upside of 3.76%. Given Arcos Dorados’ stronger consensus rating and higher possible upside, analysts clearly believe Arcos Dorados is more favorable than Rave Restaurant Group.

Summary

Arcos Dorados beats Rave Restaurant Group on 8 of the 14 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 Arcos Dorados

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela. The company was founded in 2007 and is based in Montevideo, Uruguay.