Head to Head Contrast: Luby’s (LUB) versus Starbucks (SBUX)

Luby’s (NYSE: LUB) and Starbucks (NASDAQ:SBUX) are both cyclical consumer goods & services companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, institutional ownership, earnings, valuation, risk and analyst recommendations.

Profitability

This table compares Luby’s and Starbucks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Luby’s -6.19% -6.47% -4.08%
Starbucks 12.89% 53.34% 21.21%

Analyst Ratings

This is a summary of recent ratings for Luby’s and Starbucks, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Luby’s 0 0 0 0 N/A
Starbucks 0 10 18 1 2.69

Starbucks has a consensus price target of $63.25, indicating a potential upside of 6.70%. Given Starbucks’ higher probable upside, analysts clearly believe Starbucks is more favorable than Luby’s.

Insider & Institutional Ownership

41.2% of Luby’s shares are held by institutional investors. Comparatively, 71.1% of Starbucks shares are held by institutional investors. 35.2% of Luby’s shares are held by company insiders. Comparatively, 3.4% of Starbucks 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.

Earnings & Valuation

This table compares Luby’s and Starbucks’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Luby’s $376.03 million 0.22 -$23.26 million ($0.77) -3.60
Starbucks $22.39 billion 3.77 $2.88 billion $1.97 30.09

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

Risk & Volatility

Luby’s has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500. Comparatively, Starbucks has a beta of 0.75, indicating that its stock price is 25% less volatile than the S&P 500.

Dividends

Starbucks pays an annual dividend of $1.20 per share and has a dividend yield of 2.0%. Luby’s does not pay a dividend. Starbucks pays out 60.9% of its earnings in the form of a dividend.

Summary

Starbucks beats Luby’s on 13 of the 15 factors compared between the two stocks.

About Luby’s

Luby’s, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

About Starbucks

Starbucks Corporation (Starbucks) is a roaster, marketer and retailer of coffee. As of October 2, 2016, the Company operated in 75 countries. The Company operates through four segments: Americas, which is inclusive of the United States, Canada, and Latin America; China/Asia Pacific (CAP); Europe, Middle East, and Africa (EMEA), and Channel Development. The Company’s Americas, CAP, and EMEA segments include both company-operated and licensed stores. Its Channel Development segment includes roasted whole bean and ground coffees, Tazo teas, Starbucks- and Tazo-branded single-serve products, a range of ready-to-drink beverages, such as Frappuccino, Starbucks Doubleshot and Starbucks Refreshers beverages and other branded products sold across the world through channels, such as grocery stores, warehouse clubs, specialty retailers, convenience stores and the United States foodservice accounts.

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