Contrasting Dave & Buster’s Entertainment (NASDAQ:PLAY) and Wingstop (NASDAQ:WING)

Dave & Buster’s Entertainment (NASDAQ:PLAY) and Wingstop (NASDAQ:WING) are both retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their risk, analyst recommendations, earnings, institutional ownership, valuation, dividends and profitability.

Volatility and Risk

Dave & Buster’s Entertainment has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500. Comparatively, Wingstop has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500.

Institutional & Insider Ownership

99.2% of Dave & Buster’s Entertainment shares are owned by institutional investors. 3.7% of Dave & Buster’s Entertainment shares are owned by insiders. Comparatively, 1.0% of Wingstop shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Dave & Buster’s Entertainment and Wingstop’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dave & Buster’s Entertainment 7.82% 37.48% 5.39%
Wingstop 10.26% -10.13% 13.66%

Earnings and Valuation

This table compares Dave & Buster’s Entertainment and Wingstop’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dave & Buster’s Entertainment $1.27 billion 0.42 $117.22 million $2.93 5.91
Wingstop $199.68 million 11.12 $20.48 million $0.73 103.22

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

Dividends

Dave & Buster’s Entertainment pays an annual dividend of $0.64 per share and has a dividend yield of 3.7%. Wingstop pays an annual dividend of $0.44 per share and has a dividend yield of 0.6%. Dave & Buster’s Entertainment pays out 21.8% of its earnings in the form of a dividend. Wingstop pays out 60.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Dave & Buster’s Entertainment has raised its dividend for 1 consecutive years and Wingstop has raised its dividend for 2 consecutive years. Dave & Buster’s Entertainment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Dave & Buster’s Entertainment and Wingstop, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dave & Buster’s Entertainment 0 10 3 0 2.23
Wingstop 0 7 12 0 2.63

Dave & Buster’s Entertainment presently has a consensus price target of $43.81, suggesting a potential upside of 153.08%. Wingstop has a consensus price target of $102.65, suggesting a potential upside of 36.23%. Given Dave & Buster’s Entertainment’s higher probable upside, equities research analysts plainly believe Dave & Buster’s Entertainment is more favorable than Wingstop.

Summary

Dave & Buster’s Entertainment beats Wingstop on 10 of the 17 factors compared between the two stocks.

About Dave & Buster’s Entertainment

Dave & Buster's Entertainment, Inc. owns and operates entertainment and dining venues for adults and families. Its venues offer a menu of entrees and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. The company operates its venues under the Dave & Buster's name. As of April 02, 2019, it owned and operated 125 venues in 39 states, Puerto Rico, and Canada. The company was founded in 1982 and is headquartered in Dallas, Texas.

About Wingstop

Wingstop Inc., together with its subsidiaries, franchises and operates restaurants under the Wingstop brand name. Its restaurants offer cooked-to-order, hand-sauced, and tossed chicken wings. As of December 29, 2018, the company operated approximately 1,252 restaurants in the United States, Mexico, Panama, Singapore, Indonesia, the United Arab Emirates, the United Kingdom, Malaysia, Saudi Arabia, and Colombia. Wingstop Inc. was founded in 1994 and is headquartered in Dallas, Texas.

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