Financial Review: BAB (OTCMKTS:BABB) vs. Lamb Weston (NYSE:LW)

BAB (OTCMKTS:BABB) and Lamb Weston (NYSE:LW) are both consumer staples companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, risk, profitability, dividends, valuation, institutional ownership and earnings.

Risk and Volatility

BAB has a beta of 0.17, suggesting that its stock price is 83% less volatile than the S&P 500. Comparatively, Lamb Weston has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for BAB and Lamb Weston, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BAB	0	0	0	0	0.00
Lamb Weston	1	10	3	0	2.14

Lamb Weston has a consensus target price of $47.82, suggesting a potential upside of 14.82%. Given Lamb Weston’s stronger consensus rating and higher probable upside, analysts clearly believe Lamb Weston is more favorable than BAB.

Valuation & Earnings

This table compares BAB and Lamb Weston”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BAB	$3.44 million	1.92	$560,000.00	$0.08	11.38
Lamb Weston	$6.45 billion	0.89	$357.20 million	$2.14	19.46

Lamb Weston has higher revenue and earnings than BAB. BAB is trading at a lower price-to-earnings ratio than Lamb Weston, indicating that it is currently the more affordable of the two stocks.

Dividends

BAB pays an annual dividend of $0.04 per share and has a dividend yield of 4.4%. Lamb Weston pays an annual dividend of $1.52 per share and has a dividend yield of 3.6%. BAB pays out 50.0% of its earnings in the form of a dividend. Lamb Weston pays out 71.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lamb Weston has increased its dividend for 7 consecutive years. BAB is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

89.6% of Lamb Weston shares are owned by institutional investors. 33.7% of BAB shares are owned by company insiders. Comparatively, 0.3% of Lamb Weston shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares BAB and Lamb Weston’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BAB	16.50%	16.48%	11.69%
Lamb Weston	4.61%	23.77%	5.76%

Summary

Lamb Weston beats BAB on 11 of the 17 factors compared between the two stocks.

About BAB

BAB, Inc. franchises and licenses bagel and muffin retail units under the Big Apple Bagels (BAB), My Favorite Muffin (MFM), and SweetDuet (SD) trade names in the United States. It's BAB franchised brand includes daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches, and other related products; and MFM brand comprises various freshly baked muffins and coffees, as well as units operating as My Favorite Muffin Your All Day Bakery Café features specialty bagel sandwiches and related products. The company's SD brand includes frozen yogurt products. BAB, Inc. was founded in 1993 and is based in Deerfield, Illinois.

About Lamb Weston

Lamb Weston Holdings, Inc. produces, distributes, and markets frozen potato products worldwide. The company operates through four segments: Global, Foodservice, Retail, and Other. It offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, as well as under various customer labels. The company also provides its products under its owned or licensed brands, such as Grown in Idaho and Alexia, and other licensed brands, as well as under retailers' own brands. In addition, it engages in the vegetable and dairy businesses. The company sells its products through a network of internal sales personnel and independent brokers, agents, and distributors to chain restaurants, wholesale, grocery, mass merchants, club and specialty retailers, businesses, educational institutions, independent restaurants, regional chain restaurants, and convenience stores. Lamb Weston Holdings, Inc. was incorporated in 1950 and is headquartered in Eagle, Idaho.