Comparing Kona Grill (KONA) and Sonic (SONC)

Kona Grill (NASDAQ:KONA) and Sonic (NASDAQ:SONC) are both small-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, analyst recommendations, dividends, institutional ownership, earnings, valuation and profitability.

Volatility & Risk

Kona Grill has a beta of 0.21, indicating that its share price is 79% less volatile than the S&P 500. Comparatively, Sonic has a beta of 1.47, indicating that its share price is 47% more volatile than the S&P 500.

Valuation and Earnings

This table compares Kona Grill and Sonic’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kona Grill $179.08 million 0.17 -$23.43 million N/A N/A
Sonic $477.27 million 3.23 $63.66 million $1.25 34.61

Sonic has higher revenue and earnings than Kona Grill.

Institutional & Insider Ownership

13.0% of Kona Grill shares are held by institutional investors. 31.5% of Kona Grill shares are held by company insiders. Comparatively, 8.3% of Sonic shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations for Kona Grill and Sonic, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kona Grill 0 0 1 0 3.00
Sonic 0 12 2 0 2.14

Kona Grill presently has a consensus price target of $5.00, suggesting a potential upside of 117.86%. Sonic has a consensus price target of $35.38, suggesting a potential downside of 18.23%. Given Kona Grill’s stronger consensus rating and higher probable upside, analysts plainly believe Kona Grill is more favorable than Sonic.

Dividends

Sonic pays an annual dividend of $0.64 per share and has a dividend yield of 1.5%. Kona Grill does not pay a dividend. Sonic pays out 51.2% of its earnings in the form of a dividend. Sonic has increased its dividend for 3 consecutive years.

Profitability

This table compares Kona Grill and Sonic’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kona Grill -11.21% -114.10% -10.76%
Sonic 16.87% -23.60% 10.25%

Summary

Sonic beats Kona Grill on 10 of the 15 factors compared between the two stocks.

Kona Grill Company Profile

Kona Grill, Inc. owns and operates upscale casual restaurants under the Kona Grill brand name. As of December 31, 2017, it owned and operated 46 restaurants in 23 states of the United States and Puerto Rico; and 3 franchised restaurants in Mexico, the United Arab Emirates, and Canada. The company is based in Scottsdale, Arizona.

Sonic Company Profile

Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States. As of August 31, 2017, the company operated 3,593 Sonic Drive-Ins in 45 states, of which 228 were owned and operated by the company and 3,365 were owned and operated by franchisees. The company also owns and leases 135 properties; and sublease 53 properties to franchisees and other parties. The company was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.

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