Critical Analysis: Aramark (NYSE:ARMK) versus Meritage Hospitality Group (NYSE:MHGU)

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Aramark (NYSE:ARMK) and Meritage Hospitality Group (OTCMKTS:MHGU) are both consumer staples companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Insider & Institutional Ownership

97.8% of Aramark shares are owned by institutional investors. 3.5% of Aramark shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Aramark has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, Meritage Hospitality Group has a beta of 0.38, suggesting that its share price is 62% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Aramark and Meritage Hospitality Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aramark 0 4 8 0 2.67
Meritage Hospitality Group 0 0 0 0 N/A

Aramark currently has a consensus price target of $40.64, suggesting a potential upside of 16.50%. Given Aramark’s higher possible upside, analysts plainly believe Aramark is more favorable than Meritage Hospitality Group.

Profitability

This table compares Aramark and Meritage Hospitality Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aramark 3.27% 17.31% 3.89%
Meritage Hospitality Group 3.44% 26.10% 4.04%

Dividends

Aramark pays an annual dividend of $0.44 per share and has a dividend yield of 1.3%. Meritage Hospitality Group does not pay a dividend. Aramark pays out 22.1% of its earnings in the form of a dividend. Aramark has increased its dividend for 4 consecutive years.

Valuation and Earnings

This table compares Aramark and Meritage Hospitality Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Aramark $15.79 billion 0.54 $567.88 million $1.99 17.53
Meritage Hospitality Group $435.30 million 0.24 $13.01 million N/A N/A

Aramark has higher revenue and earnings than Meritage Hospitality Group.

Summary

Aramark beats Meritage Hospitality Group on 10 of the 14 factors compared between the two stocks.

Aramark Company Profile

Aramark provides food, facilities management, and uniform services to education, healthcare, business and industry, sports, leisure, and corrections clients in North America and internationally. It operates in three segments: Food and Support Services United States, Food and Support Services International, and Uniform and Career Apparel. The company offers managed services, including dining, catering, food service management, and convenience-oriented retail operations; non-clinical support services, such as patient food and nutrition, retail food, and procurement services; and plant operations and maintenance, custodial/housekeeping, energy management, clinical equipment maintenance, grounds keeping, and capital project management services. It also provides on-site restaurants, convenience stores, and executive dining services; beverage and vending services; and facility management services comprising landscaping, transportation, payment, and other facility consulting services relating to building operations. In addition, the company offers concessions, banquet, and catering services; retail services and merchandise sale, recreational, and lodging services; and facility management services at sports, entertainment, and recreational facilities. Additionally, the company offers correctional food, and food and facilities management services for parks; and operates commissaries, laundry facilities, and property rooms. It also provides design, sourcing and manufacturing, delivery, cleaning, maintenance, and marketing services for uniforms and accessories; provides managed restroom services; and rents uniforms, work clothing, outerwear, particulate-free garments, and non-garment items and related services that include mats, shop towels, and first aid supplies. The company was formerly known as ARAMARK Holdings Corporation and changed its name to Aramark in May 2014. Aramark was founded in 1959 and is based in Philadelphia, Pennsylvania.

Meritage Hospitality Group Company Profile

Meritage Hospitality Group Inc. operates quick-service and casual dining restaurants. The company operates restaurants under the Wendy's, Twisted Rooster, Crooked Goose, Freighters Eatery & Taproom, and Wheelhouse Kitchen & Cocktails brand names. As of November 13, 2018, it operated 314 restaurants in Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Missouri, Mississippi, North Carolina, South Carolina, Ohio, Oklahoma, Tennessee, Texas, and Virginia. The company was formerly known as Thomas Edison Inns, Inc. and changed its name to Meritage Hospitality Group Inc. in May 1996. Meritage Hospitality Group Inc. was incorporated in 1986 and is headquartered in Grand Rapids, Michigan.

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