Financial Contrast: Noodles & Co (NDLS) vs. Wingstop (WING)

Noodles & Co (NASDAQ: NDLS) and Wingstop (NASDAQ:WING) are both small-cap cyclical consumer goods & services companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Profitability

This table compares Noodles & Co and Wingstop’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Noodles & Co -17.41% -6.83% -1.19%
Wingstop 20.70% -32.39% 18.34%

Valuation & Earnings

This table compares Noodles & Co and Wingstop’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Noodles & Co $487.47 million 0.48 -$71.67 million ($3.04) -1.96
Wingstop $91.36 million 15.29 $15.43 million $0.72 66.68

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

Analyst Recommendations

This is a breakdown of current recommendations for Noodles & Co and Wingstop, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Noodles & Co 1 5 1 0 2.00
Wingstop 1 5 7 0 2.46

Noodles & Co currently has a consensus target price of $5.00, indicating a potential downside of 15.97%. Wingstop has a consensus target price of $42.27, indicating a potential downside of 11.95%. Given Wingstop’s stronger consensus rating and higher possible upside, analysts plainly believe Wingstop is more favorable than Noodles & Co.

Insider & Institutional Ownership

66.8% of Noodles & Co shares are held by institutional investors. 52.7% of Noodles & Co shares are held by company insiders. Comparatively, 1.8% of Wingstop shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Wingstop pays an annual dividend of $0.14 per share and has a dividend yield of 0.3%. Noodles & Co does not pay a dividend. Wingstop pays out 19.4% of its earnings in the form of a dividend.

Volatility & Risk

Noodles & Co has a beta of -0.43, indicating that its stock price is 143% less volatile than the S&P 500. Comparatively, Wingstop has a beta of 0.69, indicating that its stock price is 31% less volatile than the S&P 500.

Summary

Wingstop beats Noodles & Co on 11 of the 16 factors compared between the two stocks.

Noodles & Co Company Profile

Noodles & Company develops and operates fast casual restaurants. The Company’s menu includes a range of cooked-to-order dishes, including noodles and pasta, soups, salads, sandwiches and appetizers. The Company has approximately 490 restaurants, including 420 Company-owned and 70 franchised locations, across 40 states, the District of Columbia and one Canadian province. The Company offers over 30 globally inspired Asian, Mediterranean and American dishes together on a single menu. The Company offers approximately 10 fresh vegetables and six proteins, including marinated steak, naturally raised pork, chicken, meatballs, shrimp and organic tofu. The Company offers Kids Meals, which includes sides, such as broccoli, carrots, fruit, applesauce and a portion of its housemade rice crispy treat. The Company’s restaurants’ locations include Arizona, California, Colorado, Delaware, New York, North Dakota, Ohio, Texas, Utah, Virginia, Washington and Wisconsin.

Wingstop Company Profile

Wingstop Inc. is franchisor and operator of restaurants that specializes in cooked-to-order, hand-sauced and tossed chicken wings. The Company operates through two segments: Franchise and Company. As of December 31, 2016, the Company offers its guests 11 flavors on bone-in and boneless chicken wings paired with hand-cut, seasoned fries and sides. It is a casual chicken wings-focused restaurant chain with various concepts, which include wings as add-on menu items or focus on wings in a bar or sports-centric setting. The flavors include Atomic, Mango Habanero, Cajun, Original Hot, Louisiana Rub, Mild, Hickory Smoked BBQ, Lemon Pepper, Garlic Parmesan, Hawaiian and Teriyaki. It offers various order options, including eat-in, to go, individual, combo meals and family packs. The Company maintains Website hosting, and manages the development and maintenance of the mobile Wingstop application. It markets Wingstop products, services and restaurants through the Website, www.wingstop.com.

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