Head-To-Head Analysis: Denny’s (DENN) vs. Papa John’s International (NASDAQ:PZZA)

Papa John’s International (NASDAQ: PZZA) and Denny’s (NASDAQ:DENN) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, valuation and risk.

Institutional and Insider Ownership

84.2% of Papa John’s International shares are owned by institutional investors. Comparatively, 91.5% of Denny’s shares are owned by institutional investors. 27.7% of Papa John’s International shares are owned by insiders. Comparatively, 5.2% of Denny’s shares are owned 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.

Analyst Ratings

This is a breakdown of current ratings and price targets for Papa John’s International and Denny’s, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Papa John’s International 0 6 3 0 2.33
Denny’s 0 2 1 0 2.33

Papa John’s International presently has a consensus target price of $79.25, indicating a potential upside of 31.38%. Denny’s has a consensus target price of $12.67, indicating a potential downside of 6.79%. Given Papa John’s International’s higher probable upside, equities analysts clearly believe Papa John’s International is more favorable than Denny’s.

Valuation and Earnings

This table compares Papa John’s International and Denny’s’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Papa John’s International $1.71 billion 1.23 $102.82 million $2.90 20.80
Denny’s $506.95 million 1.75 $19.40 million $0.52 26.14

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

Dividends

Papa John’s International pays an annual dividend of $0.90 per share and has a dividend yield of 1.5%. Denny’s does not pay a dividend. Papa John’s International pays out 31.0% of its earnings in the form of a dividend.

Profitability

This table compares Papa John’s International and Denny’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Papa John’s International 6.12% 4,321.08% 19.07%
Denny’s 7.21% -52.30% 13.31%

Volatility and Risk

Papa John’s International has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500. Comparatively, Denny’s has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500.

Summary

Papa John’s International beats Denny’s on 9 of the 15 factors compared between the two stocks.

Papa John’s International Company Profile

Papa John’s International, Inc. (Papa John’s) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark Papa John’s. The Company operates through five segments: domestic Company-owned restaurants, North America commissaries, North America franchising, international operations and all other business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. International franchisees are defined as all franchise operations outside of the United States and Canada. As of December 25, 2016, there were 5,097 Papa John’s restaurants in operation, consisting of 744 Company-owned and 4,353 franchised restaurants operating domestically in all 50 states and in 45 countries and territories. It offers pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages.

Denny’s Company Profile

Denny’s Corporation (Denny’s) operates a franchised full-service restaurant chain. The Company, through its subsidiary, Denny’s, Inc., owns and operates the Denny’s brand. As of December 28, 2016, the Denny’s brand consisted of 1,733 franchised, licensed and Company-operated restaurants around the world, including 1,610 restaurants in the United States and 123 international locations. As of December 28, 2016, 1,564 of its restaurants were franchised or licensed and 169 were Company-operated. In addition to its breakfast-all-day items, Denny’s offers a selection of lunch and dinner items, including burgers, sandwiches, salads and skillet entrees, along with an assortment of beverages, appetizers and desserts. The Company’s Fit Fare menu helps its guests identify items suited to their dietary needs. Most Denny’s restaurants offer special items for children and seniors. The Company has restaurant locations within travel centers, primarily with Pilot and Pilot Flying J Travel Centers.

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