Analyzing Noodles & Company (NASDAQ:NDLS) and Rave Restaurant Group (NASDAQ:RAVE)

Noodles & Company (NASDAQ:NDLS) and Rave Restaurant Group (NASDAQ:RAVE) are both small-cap consumer cyclical companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, dividends, valuation, institutional ownership, analyst recommendations, earnings and risk.

Insider and Institutional Ownership

65.7% of Noodles & Company shares are held by institutional investors. Comparatively, 15.1% of Rave Restaurant Group shares are held by institutional investors. 2.9% of Noodles & Company shares are held by insiders. Comparatively, 27.8% of Rave Restaurant Group shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Noodles & Company and Rave Restaurant Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Noodles & Company	$500.92 million	0.11	-$9.86 million	($0.29)	-4.07
Rave Restaurant Group	$12.15 million	3.34	$2.47 million	$0.17	16.35

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

Profitability

This table compares Noodles & Company and Rave Restaurant Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Noodles & Company	-5.03%	-42.03%	-2.66%
Rave Restaurant Group	20.27%	21.29%	16.58%

Analyst Ratings

This is a summary of recent ratings for Noodles & Company and Rave Restaurant Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Noodles & Company	0	1	2	0	2.67
Rave Restaurant Group	0	0	0	0	N/A

Noodles & Company currently has a consensus price target of $3.67, indicating a potential upside of 210.73%. Given Noodles & Company’s higher possible upside, equities analysts clearly believe Noodles & Company is more favorable than Rave Restaurant Group.

Risk & Volatility

Noodles & Company has a beta of 1.73, suggesting that its share price is 73% more volatile than the S&P 500. Comparatively, Rave Restaurant Group has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500.

Summary

Rave Restaurant Group beats Noodles & Company on 8 of the 13 factors compared between the two stocks.

About Noodles & Company

Noodles & Company, a restaurant concept company, develops and operates fast-casual restaurants. It offers cooked-to-order dishes, including noodles and pasta, soups, salads, and appetizers. It operates company owned locations and franchise locations. The company was founded in 1995 and is based in Broomfield, Colorado.

About Rave Restaurant Group

Rave Restaurant Group, Inc., together with its subsidiaries, engages in the operation and franchising of pizza buffet, delivery/carry-out (delco), and express restaurants under the Pizza Inn and Pie Five trademarks in the United States and internationally. The company operates through three segments: Pizza Inn Franchising, Pie Five Franchising, and Company-Owned Restaurants. Its buffet restaurants are located in free standing buildings or strip centers in retail developments that offer dine-in, carryout, and catering services, as well as delivery services. The company’s delco restaurants provide delivery and carryout services and are located in shopping centers or other in-line retail developments. Its Express restaurants serve customers through various non-traditional points of sale and are located in convenience stores, food courts, college campuses, airport terminals, travel plazas, athletic facilities, or other commercial facilities. The company’s Pizza Inn Express restaurants serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express, located at production-oriented facilities. In addition, it operates and franchises fast casual restaurants under the Pie Five Pizza Company or Pie Five trademarks. The company was formerly known as Pizza Inn Holdings, Inc. and changed its name to Rave Restaurant Group, Inc. in January 2015. Rave Restaurant Group, Inc. was founded in 1958 and is based in The Colony, Texas.