Star Buffet (STRZ) & Sonic (SONC) Critical Review

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Sonic and Star Buffet, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic 0 11 1 0 2.08
Star Buffet 0 0 0 0 N/A

Sonic presently has a consensus target price of $37.00, suggesting a potential downside of 14.92%. Given Sonic’s higher probable upside, equities analysts clearly believe Sonic is more favorable than Star Buffet.

Risk & Volatility

Sonic has a beta of 1.32, meaning that its stock price is 32% more volatile than the S&P 500. Comparatively, Star Buffet has a beta of 3.45, meaning that its stock price is 245% more volatile than the S&P 500.

Valuation and Earnings

This table compares Sonic and Star Buffet’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sonic $423.59 million 3.66 $71.20 million $1.49 29.19
Star Buffet $26.52 million 0.08 $120,000.00 N/A N/A

Sonic has higher revenue and earnings than Star Buffet.

Profitability

This table compares Sonic and Star Buffet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sonic 16.81% -21.64% 10.39%
Star Buffet -1.04% N/A -3.89%

Dividends

Sonic pays an annual dividend of $0.64 per share and has a dividend yield of 1.5%. Star Buffet does not pay a dividend. Sonic pays out 43.0% of its earnings in the form of a dividend. Sonic has increased its dividend for 4 consecutive years.

Insider & Institutional Ownership

89.1% of Sonic shares are owned by institutional investors. 8.3% of Sonic shares are owned by insiders. Comparatively, 53.6% of Star Buffet shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Sonic beats Star Buffet on 10 of the 14 factors compared between the two stocks.

Sonic Company Profile

Sonic Corp., through its subsidiaries, operates and franchises a chain of drive-in restaurants in the United States. As of August 31, 2018, the company operated 3,606 Sonic Drive-Ins in 45 states, including 3,427 Drive-Ins owned and operated by franchisees; and 179 Drive-Ins owned and operated by the company. The company also owns and leases 162 properties; and sublease 48 properties to franchisees and other parties. Sonic Corp. was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.

Star Buffet Company Profile

Star Buffet, Inc. owns and operates full service restaurants in the United States. As of July 19, 2018, it operated 27 restaurants in 10 states. The company operates its restaurants under the 4B's, JB's, Barnhill's Salads Buffet Desserts, Casa Bonita, and BuddyFreddys names. Star Buffet, Inc. was founded in 1997 and is based in Scottsdale, Arizona.

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