Head to Head Comparison: Potbelly (PBPB) versus Luby’s (LUB)

Potbelly (NASDAQ: PBPB) and Luby’s (NYSE:LUB) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, earnings, valuation, profitability, analyst recommendations and dividends.

Analyst Ratings

This is a summary of recent ratings and target prices for Potbelly and Luby’s, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly 0 3 1 0 2.25
Luby’s 0 0 0 0 N/A

Potbelly presently has a consensus price target of $14.33, indicating a potential upside of 10.26%. Given Potbelly’s higher possible upside, analysts plainly believe Potbelly is more favorable than Luby’s.

Profitability

This table compares Potbelly and Luby’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potbelly 0.54% 7.80% 5.48%
Luby’s -6.19% -6.47% -4.08%

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Potbelly $407.13 million 0.79 $8.21 million $0.09 144.46
Luby’s $376.03 million 0.22 -$23.26 million ($0.79) -3.57

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

Institutional & Insider Ownership

73.5% of Potbelly shares are held by institutional investors. Comparatively, 41.2% of Luby’s shares are held by institutional investors. 9.6% of Potbelly shares are held by company insiders. Comparatively, 35.2% of Luby’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

Potbelly has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, Luby’s has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500.

Summary

Potbelly beats Luby’s on 11 of the 12 factors compared between the two stocks.

About Potbelly

Potbelly Corporation owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. As of December 25, 2016, the Company operated Potbelly Sandwich Works sandwich shops in 29 states and the District of Columbia. As of December 25, 2016, the Company had a domestic base of 441 shops in 29 states and the District of Columbia. Of these, the company operated 411 shops, and franchisees operated 30 shops, as of December 25, 2016. As of December 25, 2016, the Company had 13 international franchised shops, which included 11 shops in the Middle East, a shop in the United Kingdom and a shop in Canada. As of December 25, 2016, the Company had domestic franchise shops in Arkansas, Iowa, Illinois, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Virginia.

About Luby’s

Luby’s, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

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