Wendy’s (NASDAQ:WEN – Get Free Report) and Dave & Buster’s Entertainment (NASDAQ:PLAY – Get Free Report) are both small-cap retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, analyst recommendations, dividends, earnings, institutional ownership and profitability.
Dividends
Wendy’s pays an annual dividend of $0.56 per share and has a dividend yield of 7.1%. Dave & Buster’s Entertainment pays an annual dividend of $0.64 per share and has a dividend yield of 6.3%. Wendy’s pays out 71.8% of its earnings in the form of a dividend. Dave & Buster’s Entertainment pays out -33.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.
Risk & Volatility
Wendy’s has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500. Comparatively, Dave & Buster’s Entertainment has a beta of 1.84, suggesting that its share price is 84% more volatile than the S&P 500.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Wendy’s | 6 | 13 | 3 | 0 | 1.86 |
| Dave & Buster’s Entertainment | 2 | 5 | 2 | 0 | 2.00 |
Wendy’s presently has a consensus target price of $8.06, indicating a potential upside of 2.71%. Dave & Buster’s Entertainment has a consensus target price of $19.33, indicating a potential upside of 91.23%. Given Dave & Buster’s Entertainment’s stronger consensus rating and higher possible upside, analysts plainly believe Dave & Buster’s Entertainment is more favorable than Wendy’s.
Earnings and Valuation
This table compares Wendy’s and Dave & Buster’s Entertainment”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Wendy’s | $2.18 billion | 0.69 | $165.07 million | $0.78 | 10.06 |
| Dave & Buster’s Entertainment | $2.09 billion | 0.17 | -$48.70 million | ($1.89) | -5.35 |
Wendy’s has higher revenue and earnings than Dave & Buster’s Entertainment. Dave & Buster’s Entertainment is trading at a lower price-to-earnings ratio than Wendy’s, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Wendy’s and Dave & Buster’s Entertainment’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Wendy’s | 6.77% | 136.46% | 3.14% |
| Dave & Buster’s Entertainment | -3.09% | -24.19% | -0.72% |
Institutional & Insider Ownership
86.0% of Wendy’s shares are held by institutional investors. Comparatively, 91.4% of Dave & Buster’s Entertainment shares are held by institutional investors. 17.1% of Wendy’s shares are held by insiders. Comparatively, 1.7% of Dave & Buster’s Entertainment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Summary
Wendy’s beats Dave & Buster’s Entertainment on 11 of the 16 factors compared between the two stocks.
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.
About Dave & Buster’s Entertainment
Dave & Buster's Entertainment, Inc. owns and operates entertainment and dining venues for adults and families. Its venues offer a menu of entrees and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. The company operates its venues under the Dave & Buster's name. As of April 02, 2019, it owned and operated 125 venues in 39 states, Puerto Rico, and Canada. The company was founded in 1982 and is headquartered in Dallas, Texas.
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