Del Taco Restaurants (NYSE: ZOES) and Zoe’s Kitchen (NYSE:ZOES) 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 valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Volatility and Risk

Del Taco Restaurants has a beta of -0.09, suggesting that its share price is 109% less volatile than the S&P 500. Comparatively, Zoe’s Kitchen has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500.

Earnings & Valuation

This table compares Del Taco Restaurants and Zoe’s Kitchen’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Del Taco Restaurants $471.46 million 0.99 $49.87 million $0.52 23.42
Zoe’s Kitchen $314.10 million 0.82 -$1.99 million ($0.10) -131.10

Del Taco Restaurants has higher revenue and earnings than Zoe’s Kitchen. Zoe’s Kitchen is trading at a lower price-to-earnings ratio than Del Taco Restaurants, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

77.7% of Del Taco Restaurants shares are owned by institutional investors. Comparatively, 83.6% of Zoe’s Kitchen shares are owned by institutional investors. 14.6% of Del Taco Restaurants shares are owned by insiders. Comparatively, 4.0% of Zoe’s Kitchen shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for Del Taco Restaurants and Zoe’s Kitchen, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Del Taco Restaurants 0 1 6 0 2.86
Zoe’s Kitchen 1 6 0 0 1.86

Del Taco Restaurants presently has a consensus target price of $16.64, suggesting a potential upside of 36.64%. Zoe’s Kitchen has a consensus target price of $12.46, suggesting a potential downside of 4.97%. Given Del Taco Restaurants’ stronger consensus rating and higher probable upside, analysts clearly believe Del Taco Restaurants is more favorable than Zoe’s Kitchen.

Profitability

This table compares Del Taco Restaurants and Zoe’s Kitchen’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Del Taco Restaurants 9.79% 4.84% 2.68%
Zoe’s Kitchen -7.50% -5.77% -3.07%

Summary

Del Taco Restaurants beats Zoe’s Kitchen on 12 of the 14 factors compared between the two stocks.

About Del Taco Restaurants

Del Taco Restaurants, Inc. develops, franchises, owns, and operates Del Taco quick-service Mexican-American restaurants in the United States. The company's restaurants offer Mexican inspired and American classic dishes. As of January 2, 2018, it operated 312 company-operated and 252 franchise-operated Del Taco restaurants located in 14 states, including 1 franchise-operated unit in Guam. Del Taco Restaurants, Inc. was founded in 1964 and is headquartered in Lake Forest, California.

About Zoe’s Kitchen

Zoe's Kitchen, Inc., through its subsidiaries, develops and operates a chain of fast-casual restaurants. It operates a range of restaurant formats, including in-line, end-cap, and free-standing restaurants. As of February 22, 2018, the company operated owned and franchised 249 restaurants in 20 states of the United States. Zoe's Kitchen, Inc. was founded in 1995 and is based in Plano, Texas.

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