Is Ruth’s Chris or Del Frisco’s the Juicier Steakhouse?

For many, there's nothing better than a quality steak. Two of the higher-end steakhouse corporate parents are Ruth's Hospitality Group  (NASDAQ: RUTH  ) , the parent company of Ruth's Chris Steak House, and Del Frisco's Restaurant Group  (NASDAQ: DFRG  ) , the parent company of Del Frisco's Double Eagle, Del Frisco's Grille, and Sullivan's. As an investor, which one is the juicier opportunity?

You can't handle the Ruth
Ruth's Hospitality Group, which also runs Mitchell's Fish Market, had modest results. Its 2013 revenue rose 2.6% to $406.6 million from $396.1 million in 2012. Comparable-store sales in 2013 increased 1.8% from the previous year. Ruth's Hospitality is not a large company, with a market cap of around $450 million, but it is looking to expand; CEO Michael O'Donnell has said that he would like to open 10 more restaurants over the next three years.

At year-end 2013, the company owned 63 Ruth's Chris Steak House restaurants and 19 Mitchell's Fish Market restaurants. Ruth's Hospitality also franchises the Ruth's Chris Steak House restaurant; 12 new restaurants have either opened or relocated in the past two years, including a Ruth's Chris Steak House in Shanghai that opened in the fourth quarter of 2013. There were 75 franchisee-owned Ruth's Chris Steak House restaurants at year-end 2013, which contributed $15 million in franchisee income.

O'Donnell covered the company's strategy of rolling out menu and pricing innovations, including Ruth's Season Classics -- a prix fixe menu -- and its Sizzle, Swizzle and Swirl happy-hour premium bar menu, which allows guests to further enjoy the restaurant's offerings and does not compete with its dining room sales. On the marketing front, Ruth's Hospitality introduced e-card capabilities to connect further with its guests.

Is Del Frisco's delicious?
Meanwhile, Del Frisco's had stronger revenue. Its 2013 revenue rose 16.9% to $271.8 million compared to $232.4 million in 2012. Its comparable-store sales were close to those of Ruth's Hospitality, growing 1.3% in 2013 over the previous year.

Del Frisco's is larger than Ruth's Hospitality, with a market cap of around $620 million. It is also planning to open five new Del Frisco's Grilles and one Del Frisco's Double Eagle in 2014. At year-end 2013, Del Frisco's had 40 restaurants in more than 20 states, with fourth-quarter 2013 openings in Palm Beach, FL., Fort Worth, Texas, Southlake, Texas, and Chestnut Hill, MA.

In the fourth quarter, Del Frisco's offered a Prime Pair prix fixe menu on Sundays, which proved to be popular with guests, according to CEO Mark Mednansky. The more casual Del Frisco's Grille was able to draw in a broader demographic of guests and opportunities, including a younger crowd and more female guests than Del Frisco's other steakhouse restaurants. The Grille is also open during lunch and has more real estate flexibility than the other Del Frisco's restaurants.

Which one makes the cut?
Investors have already made their preference known. Del Frisco's P/E is 52.4 compared to Ruth's Hospitality at 19.4, with the industry average at 23.2. Part of the reasoning here is that Del Frisco's has grown its annual revenue at a faster pace than its competitor (16.9% vs. 2.6%).

Furthermore, Ruth's Hospitality has more restaurants than its rival while generating less revenue overall. A few new Del Frisco's restaurants would generate more revenue than multiple openings of similar Ruth's Chris restaurants. Furthermore, Del Frisco's is focusing further on limiting its financial liabilities. Mednansky said,

[R]esults fell short of our expectations due to a combination of factors -- inefficiencies at four newly opened Grille restaurants, slightly later new restaurant openings within the quarter, lower operating leverage on the 17th week than we had anticipated, and weather issues during our very profitable holiday season. Still, Del Frisco's Double Eagle delivered impressive, industry-leading sales and traffic gains, while at Sullivan's, trends improved sequentially as brand enhancements began to take hold. Looking ahead, we are very optimistic that our guests will be eager to dine out in 2014 and we will continue to focus on reducing new unit inefficiencies.

If Del Frisco's can deliver on some of its promises -- admittedly, weather issues are beyond its control -- I would expect the company to continue its revenue growth streak and making its investors happy.

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