Denny’s (NASDAQ:DENN) & BAB (OTCMKTS:BABB) Critical Analysis

Denny’s (NASDAQ:DENN) and BAB (OTCMKTS:BABB) 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 dividends, profitability, valuation, institutional ownership, risk, earnings and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations for Denny’s and BAB, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Denny’s	0	3	3	0	2.50
BAB	0	0	0	0	N/A

Denny’s currently has a consensus target price of $11.42, suggesting a potential upside of 41.12%. Given Denny’s’ higher probable upside, research analysts clearly believe Denny’s is more favorable than BAB.

Insider and Institutional Ownership

85.1% of Denny’s shares are owned by institutional investors. 4.2% of Denny’s shares are owned by company insiders. Comparatively, 33.7% of BAB shares are owned by company 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.

Volatility and Risk

Denny’s has a beta of 1.94, indicating that its stock price is 94% more volatile than the S&P 500. Comparatively, BAB has a beta of 0.08, indicating that its stock price is 92% less volatile than the S&P 500.

Earnings & Valuation

This table compares Denny’s and BAB’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Denny’s	$456.43 million	0.92	$19.94 million	$0.43	18.81
BAB	$3.51 million	1.60	$470,000.00	$0.07	11.03

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

Profitability

This table compares Denny’s and BAB’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Denny’s	5.27%	-63.27%	6.66%
BAB	14.78%	17.10%	12.09%

Summary

Denny’s beats BAB on 8 of the 13 factors compared between the two stocks.

About Denny’s

Denny's Corporation, through its subsidiaries, owns and operates franchised full-service restaurant chains under the Denny's and Keke's Breakfast Cafe brands in the United States and internationally. The company was formerly known as Advantica Restaurant Group, Inc. and changed its name to Denny's Corporation in July 2002. Denny's Corporation was founded in 1953 and is headquartered in Spartanburg, South Carolina.

About BAB

BAB, Inc. franchises and licenses bagel and muffin retail units under the Big Apple Bagels (BAB), My Favorite Muffin (MFM), and SweetDuet (SD) trade names in the United States. It's BAB franchised brand includes daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches, and other related products; and MFM brand comprises various freshly baked muffins and coffees, as well as units operating as My Favorite Muffin Your All Day Bakery Café features specialty bagel sandwiches and related products. The company's SD brand includes frozen yogurt products. BAB, Inc. was founded in 1993 and is based in Deerfield, Illinois.