Reviewing Dave & Buster’s Entertainment (NASDAQ:PLAY) & RCI Hospitality Holdings (RICK)

RCI Hospitality Holdings (NASDAQ: RICK) and Dave & Buster’s Entertainment (NASDAQ:PLAY) are both consumer discretionary companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, earnings, risk and dividends.

Risk & Volatility

RCI Hospitality Holdings has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500. Comparatively, Dave & Buster’s Entertainment has a beta of 0.64, suggesting that its stock price is 36% less volatile than the S&P 500.

Dividends

RCI Hospitality Holdings pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. Dave & Buster’s Entertainment does not pay a dividend. RCI Hospitality Holdings pays out 10.6% of its earnings in the form of a dividend.

Profitability

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

Net Margins Return on Equity Return on Assets
RCI Hospitality Holdings 7.84% 10.75% 5.08%
Dave & Buster’s Entertainment 9.78% 22.71% 9.34%

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
RCI Hospitality Holdings $138.72 million 1.69 $35.64 million $1.13 21.31
Dave & Buster’s Entertainment $1.05 billion 2.37 $254.99 million $2.36 25.40

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

Institutional & Insider Ownership

40.4% of RCI Hospitality Holdings shares are held by institutional investors. 7.6% of RCI Hospitality Holdings shares are held by insiders. Comparatively, 5.6% of Dave & Buster’s Entertainment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for RCI Hospitality Holdings and Dave & Buster’s Entertainment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RCI Hospitality Holdings 0 0 2 0 3.00
Dave & Buster’s Entertainment 0 0 9 0 3.00

RCI Hospitality Holdings presently has a consensus target price of $28.50, suggesting a potential upside of 18.36%. Dave & Buster’s Entertainment has a consensus target price of $77.50, suggesting a potential upside of 29.27%. Given Dave & Buster’s Entertainment’s higher probable upside, analysts clearly believe Dave & Buster’s Entertainment is more favorable than RCI Hospitality Holdings.

Summary

Dave & Buster’s Entertainment beats RCI Hospitality Holdings on 12 of the 15 factors compared between the two stocks.

About RCI Hospitality Holdings

With more than 40 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country’s leading company in gentlemen’s clubs and sports bars/restaurants. Clubs in New York City, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, and other cities operate under brand names, such as “Rick’s Cabaret,” “XTC,” “Club Onyx,” “Vivid Cabaret,” “Jaguars” and “Tootsie’s Cabaret.” Sports bars/restaurants operate under the brand name “Bombshells Restaurant & Bar.” Investors are attracted by RCI’s strong cash flow, operating margins and local laws that create high barriers to entry in the gentlemen’s club business.

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