Analyzing Starbucks (NASDAQ:SBUX) and Wingstop (NASDAQ:WING)

Starbucks (NASDAQ:SBUX) and Wingstop (NASDAQ:WING) are both retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, earnings, dividends, profitability, valuation and risk.

Earnings & Valuation

This table compares Starbucks and Wingstop”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starbucks	$37.18 billion	3.14	$1.86 billion	$1.32	77.64
Wingstop	$696.85 million	6.32	$174.27 million	$4.02	40.25

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

Dividends

Starbucks pays an annual dividend of $2.48 per share and has a dividend yield of 2.4%. Wingstop pays an annual dividend of $1.20 per share and has a dividend yield of 0.7%. Starbucks pays out 187.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Wingstop pays out 29.9% of its earnings in the form of a dividend. Starbucks has increased its dividend for 15 consecutive years and Wingstop has increased its dividend for 7 consecutive years. Starbucks is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Starbucks and Wingstop’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Starbucks	3.89%	-29.24%	7.42%
Wingstop	15.77%	-16.22%	17.12%

Risk and Volatility

Starbucks has a beta of 0.98, indicating that its stock price is 2% less volatile than the S&P 500. Comparatively, Wingstop has a beta of 1.79, indicating that its stock price is 79% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Starbucks and Wingstop, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starbucks	2	10	19	0	2.55
Wingstop	1	5	24	2	2.84

Starbucks currently has a consensus target price of $108.92, indicating a potential upside of 6.29%. Wingstop has a consensus target price of $260.89, indicating a potential upside of 61.22%. Given Wingstop’s stronger consensus rating and higher possible upside, analysts clearly believe Wingstop is more favorable than Starbucks.

Insider and Institutional Ownership

72.3% of Starbucks shares are held by institutional investors. 0.0% of Starbucks shares are held by insiders. Comparatively, 0.5% of Wingstop shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Wingstop beats Starbucks on 12 of the 18 factors compared between the two stocks.

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.

About Wingstop

Wingstop Inc., together with its subsidiaries, franchises and operates restaurants under the Wingstop brand. Its restaurants offer classic wings, boneless wings, tenders, and hand-sauced-and-tossed in various flavors, as well as chicken sandwiches with fries and hand-cut carrots and celery that are cooked-to-order. The company was founded in 1994 and is headquartered in Addison, Texas.