Critical Analysis: BJ’s Restaurants (BJRI) and Brinker International (NYSE:EAT)

BJ’s Restaurants (NASDAQ: BJRI) and Brinker International (NYSE:EAT) are both small-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.

Analyst Ratings

This is a summary of recent ratings and recommmendations for BJ’s Restaurants and Brinker International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BJ’s Restaurants 2 7 1 0 1.90
Brinker International 1 12 3 0 2.13

BJ’s Restaurants currently has a consensus price target of $38.88, indicating a potential upside of 20.36%. Brinker International has a consensus price target of $44.73, indicating a potential upside of 32.21%. Given Brinker International’s stronger consensus rating and higher possible upside, analysts clearly believe Brinker International is more favorable than BJ’s Restaurants.

Valuation and Earnings

This table compares BJ’s Restaurants and Brinker International’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BJ’s Restaurants $1.02 billion 0.68 $122.11 million $1.71 18.89
Brinker International $3.15 billion 0.53 $435.24 million $2.99 11.31

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

Institutional and Insider Ownership

96.7% of BJ’s Restaurants shares are held by institutional investors. 6.8% of BJ’s Restaurants shares are held by company insiders. Comparatively, 1.8% of Brinker International shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Brinker International pays an annual dividend of $1.36 per share and has a dividend yield of 4.0%. BJ’s Restaurants does not pay a dividend. Brinker International pays out 45.5% of its earnings in the form of a dividend. BJ’s Restaurants has raised its dividend for 6 consecutive years.

Risk & Volatility

BJ’s Restaurants has a beta of 1.08, indicating that its share price is 8% more volatile than the S&P 500. Comparatively, Brinker International has a beta of 0.25, indicating that its share price is 75% less volatile than the S&P 500.

Profitability

This table compares BJ’s Restaurants and Brinker International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BJ’s Restaurants 3.82% 14.51% 5.71%
Brinker International 4.79% -31.46% 11.30%

Summary

Brinker International beats BJ’s Restaurants on 9 of the 17 factors compared between the two stocks.

BJ’s Restaurants Company Profile

BJ’s Restaurants, Inc. owns and operates restaurants. The Company segment includes casual dining company-owned restaurants. Each of its restaurants is operated either as a BJ’s Restaurant & Brewhouse, a BJ’s Restaurant & Brewery, a BJ’s Pizza & Grill or a BJ’s Grill restaurant. The Company’s restaurants offer craft beers and other beers, as well as a selection of appetizers, entrees, pastas, burgers and sandwiches, specialty salads, and desserts, including its warm pizza cookie dessert, the Pizookie. As of February 27, 2017, the Company owned and operated 189 restaurants located in 24 states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Virginia and Washington.

Brinker International Company Profile

Brinker International, Inc. is engaged in the ownership, operation, development, and franchising of the Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) restaurant brands. The Company’s Chili’s operates Bar & Grill category of casual dining. Chili’s menu features authentic Fresh Mex and Fresh Tex cuisine, including signature items, such as Baby Back Ribs smoked in-house, Hand-Crafted Burgers served with house-made garlic dill pickles, Mix and Match Fajitas, Tableside Guacamole and house-made Chips and Salsa. Maggiano’s is a full-service, casual dining Italian restaurant brand. Its Maggiano’s restaurants feature individual and family-style menus, and its restaurants also has banquet facilities designed to host party business or social events. The Company owns, operates or franchises restaurants, which include approximately 1,650 restaurants in the United States, over 30 countries and approximately two territories outside of the United States.

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