Head to Head Comparison: Potbelly (NASDAQ:PBPB) vs. RCI Hospitality (NASDAQ:RICK)

Potbelly (NASDAQ:PBPB) and RCI Hospitality (NASDAQ:RICK) are both small-cap retail/wholesale companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, analyst recommendations, dividends, institutional ownership, earnings, risk and valuation.

Profitability

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

Net Margins Return on Equity Return on Assets
Potbelly -15.81% -71.11% -9.83%
RCI Hospitality -4.60% 2.96% 1.29%

Institutional & Insider Ownership

45.6% of Potbelly shares are held by institutional investors. Comparatively, 52.3% of RCI Hospitality shares are held by institutional investors. 4.6% of Potbelly shares are held by company insiders. Comparatively, 8.1% of RCI Hospitality shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Volatility and Risk

Potbelly has a beta of 1.6, meaning that its share price is 60% more volatile than the S&P 500. Comparatively, RCI Hospitality has a beta of 2.03, meaning that its share price is 103% more volatile than the S&P 500.

Valuation and Earnings

This table compares Potbelly and RCI Hospitality’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Potbelly $409.71 million 0.30 -$23.99 million ($0.10) -51.10
RCI Hospitality $132.33 million 4.14 -$6.09 million $0.51 119.49

RCI Hospitality has lower revenue, but higher earnings than Potbelly. Potbelly is trading at a lower price-to-earnings ratio than RCI Hospitality, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings for Potbelly and RCI Hospitality, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potbelly 0 0 0 0 N/A
RCI Hospitality 0 0 0 0 N/A

RCI Hospitality has a consensus target price of $42.00, indicating a potential downside of 31.08%. Given RCI Hospitality’s higher possible upside, analysts clearly believe RCI Hospitality is more favorable than Potbelly.

Summary

RCI Hospitality beats Potbelly on 10 of the 12 factors compared between the two stocks.

Potbelly Company Profile

Potbelly Corporation, through its subsidiaries, owns, operates, and franchises Potbelly Sandwich Works sandwich shops in the United States. The company offers toasty warm sandwiches, salads, soups, chili, sides, desserts, breakfast sandwiches, and steel cut oatmeal. As of February 25, 2020, the company operated approximately 400 shops in the United States; and approximately 40 franchisees operated shops in the United States. The company was formerly known as Potbelly Sandwich Works, Inc. and changed its name to Potbelly Corporation in 2002. Potbelly Corporation was founded in 1977 and is headquartered in Chicago, Illinois.

RCI Hospitality Company Profile

RCI Hospitality Holdings, Inc., through its subsidiaries, engages in the hospitality and related businesses in the United States. It operates in Nightclubs, Bombshells, and Media Group segments. The company’s wholly-owned subsidiaries own and/or operates upscale adult nightclubs serving primarily businessmen and professionals under the Rick's Cabaret, Jaguars Club, Tootsie's Cabaret, XTC Cabaret, Club Onyx, Hoops Cabaret and Sports Bar, Scarlett's Cabaret, Temptations Adult Cabaret, Foxy's Cabaret, Vivid Cabaret, Downtown Cabaret, Cabaret East, The Seville, Silver City Cabaret, and Kappa Men's Club. Wholly-owned subsidiaries also operate restaurants and sports bars under the Bombshells Restaurant & Bar brand; and dance clubs under the Studio 80 brand. As of February 11, 2019, the company operated 46 units, including 39 nightclub units and 7 Bombshell units. In addition, it owns two national industry trade publications serving the adult nightclubs industry and the adult retail products industry; a national industry convention and tradeshow; and two national industry award shows, as well as approximately a dozen industry and social media Websites. The company founded in 1983 as Rick's Cabaret International, Inc., changed its name to RCI Hospitality Holdings, Inc. in August 2014, and is based in Houston, Texas.

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