Reviewing Restaurant Brands International (QSR) and Diversified Restaurant Holdings (NASDAQ:SAUC)

Restaurant Brands International (NYSE: QSR) and Diversified Restaurant Holdings (NASDAQ:SAUC) are both retail/wholesale companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, profitabiliy, risk, valuation, dividends and earnings.

Analyst Ratings

This is a breakdown of recent ratings for Restaurant Brands International and Diversified Restaurant Holdings, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Restaurant Brands International	0	4	11	0	2.73
Diversified Restaurant Holdings	0	0	1	0	3.00

Restaurant Brands International presently has a consensus price target of $63.07, indicating a potential upside of 3.91%. Diversified Restaurant Holdings has a consensus price target of $3.50, indicating a potential upside of 60.55%. Given Diversified Restaurant Holdings’ stronger consensus rating and higher probable upside, analysts plainly believe Diversified Restaurant Holdings is more favorable than Restaurant Brands International.

Profitability

This table compares Restaurant Brands International and Diversified Restaurant Holdings’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Restaurant Brands International	12.66%	22.71%	3.99%
Diversified Restaurant Holdings	-3.39%	-60.83%	-0.51%

Volatility & Risk

Restaurant Brands International has a beta of 1.77, meaning that its share price is 77% more volatile than the S&P 500. Comparatively, Diversified Restaurant Holdings has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500.

Institutional & Insider Ownership

75.5% of Restaurant Brands International shares are owned by institutional investors. Comparatively, 9.4% of Diversified Restaurant Holdings shares are owned by institutional investors. 4.2% of Restaurant Brands International shares are owned by insiders. Comparatively, 48.2% of Diversified Restaurant Holdings shares are owned by 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 and Valuation

This table compares Restaurant Brands International and Diversified Restaurant Holdings’ gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Restaurant Brands International	$4.32 billion	3.31	$1.84 billion	$1.44	42.15
Diversified Restaurant Holdings	$167.72 million	0.35	$21.44 million	($0.22)	-9.91

Restaurant Brands International has higher revenue and earnings than Diversified Restaurant Holdings. Diversified Restaurant Holdings is trading at a lower price-to-earnings ratio than Restaurant Brands International, indicating that it is currently the more affordable of the two stocks.

Dividends

Restaurant Brands International pays an annual dividend of $0.76 per share and has a dividend yield of 1.3%. Diversified Restaurant Holdings does not pay a dividend. Restaurant Brands International pays out 52.8% of its earnings in the form of a dividend.

Summary

Restaurant Brands International beats Diversified Restaurant Holdings on 11 of the 15 factors compared between the two stocks.

Restaurant Brands International Company Profile

Restaurant Brands International Inc. is a quick service restaurant (QSR) company. The Company had over 20,000 restaurants in more than 100 countries and the United States territories, as of December 31, 2016. It operates through two segments: Tim Hortons (TH) and Burger King (BK). Tim Hortons restaurants are quick service restaurants with a menu that includes blend coffee, tea, espresso-based hot and cold specialty drinks, baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps and soups, among others. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks and other food items. The Company operates coffee roasting facilities in Hamilton, Ontario and Rochester, New York. The Company sells its raw materials and supplies, including coffee, sugar, paper goods and other restaurant supplies to Tim Hortons restaurants.

Diversified Restaurant Holdings Company Profile

Diversified Restaurant Holdings, Inc. (DRH) is a restaurant company. The Company is a franchisee of Buffalo Wild Wings (BWW).As of September 25, 2016, the Company operated 64 BWW restaurants, which are located in Michigan, Florida, Missouri, Illinois and Indiana. The BWW restaurants feature a range of menu items with a multimedia social environment, a bar and an open layout designed to create a dining experience for sports fans and families. Its guests have the option of watching various sporting events on projection screens or televisions. As of September 25, 2016, the BWW menu specialized in 21 sauces and seasonings with flavors ranging from Sweet BBQ to Blazin’. As of September 25, 2016, the restaurants offered 12 to 30 domestic and imported beers on tap, including several local or regional microbrews and a selection of bottled beer, wine and liquor.