Critical Review: Starbucks (NASDAQ:SBUX) vs. ONE Group Hospitality (NASDAQ:STKS)

ONE Group Hospitality (NASDAQ:STKS) and Starbucks (NASDAQ:SBUX) are both retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, earnings, profitability, dividends, risk, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a summary of current recommendations and price targets for ONE Group Hospitality and Starbucks, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ONE Group Hospitality	1	2	2	1	2.50
Starbucks	1	12	15	0	2.50

ONE Group Hospitality currently has a consensus target price of $4.67, suggesting a potential upside of 144.33%. Starbucks has a consensus target price of $103.81, suggesting a potential upside of 12.16%. Given ONE Group Hospitality’s higher possible upside, analysts plainly believe ONE Group Hospitality is more favorable than Starbucks.

Profitability

This table compares ONE Group Hospitality and Starbucks’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ONE Group Hospitality	-11.45%	-460.16%	1.36%
Starbucks	3.63%	-28.66%	7.03%

Risk & Volatility

ONE Group Hospitality has a beta of 1.62, suggesting that its stock price is 62% more volatile than the S&P 500. Comparatively, Starbucks has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500.

Institutional and Insider Ownership

29.1% of ONE Group Hospitality shares are owned by institutional investors. Comparatively, 72.3% of Starbucks shares are owned by institutional investors. 25.1% of ONE Group Hospitality shares are owned by company insiders. Comparatively, 0.0% of Starbucks shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares ONE Group Hospitality and Starbucks”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ONE Group Hospitality	$805.72 million	0.07	-$92.24 million	($4.04)	-0.47
Starbucks	$37.18 billion	2.84	$1.86 billion	$1.21	76.49

Starbucks has higher revenue and earnings than ONE Group Hospitality. ONE Group Hospitality is trading at a lower price-to-earnings ratio than Starbucks, indicating that it is currently the more affordable of the two stocks.

Summary

Starbucks beats ONE Group Hospitality on 10 of the 14 factors compared between the two stocks.

About ONE Group Hospitality

The ONE Group Hospitality, Inc., a restaurant company, develops, owns, operates, manages, and licenses restaurants and lounges worldwide. It operates through STK, Kona Grill, and ONE Hospitality segments. The company also provides turn-key food and beverage services for hospitality venues, including hotels, casinos, and other locations. Its hospitality food and beverage solutions include developing, managing, and operating restaurants, bars, rooftops, pools, banqueting, catering, private dining rooms, room service, and mini bars; and offers hospitality advisory and consulting services. The company operates restaurants primarily under the STK and Kona Grill brands. The ONE Group Hospitality, Inc. was founded in 2004 and is based in Denver, Colorado.

About Starbucks

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. The company offers its products under the Starbucks Coffee, Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve, and Princi brands. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.