Financial Review: CarMax (NYSE:KMX) vs. DICK’S Sporting Goods (NYSE:DKS)

DICK’S Sporting Goods (NYSE:DKS) and CarMax (NYSE:KMX) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

89.8% of DICK’S Sporting Goods shares are owned by institutional investors. 28.9% of DICK’S Sporting Goods shares are owned by insiders. Comparatively, 1.0% of CarMax shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares DICK’S Sporting Goods and CarMax”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DICK’S Sporting Goods	$17.22 billion	0.95	$849.24 million	$10.52	17.42
CarMax	$25.88 billion	0.34	$247.29 million	$1.53	40.61

DICK’S Sporting Goods has higher earnings, but lower revenue than CarMax. DICK’S Sporting Goods is trading at a lower price-to-earnings ratio than CarMax, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

DICK’S Sporting Goods has a beta of 1.21, meaning that its stock price is 21% more volatile than the S&P 500. Comparatively, CarMax has a beta of 1.15, meaning that its stock price is 15% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for DICK’S Sporting Goods and CarMax, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DICK’S Sporting Goods	1	3	12	1	2.76
CarMax	3	14	2	1	2.05

DICK’S Sporting Goods currently has a consensus price target of $258.44, suggesting a potential upside of 41.05%. CarMax has a consensus price target of $51.00, suggesting a potential downside of 17.93%. Given DICK’S Sporting Goods’ stronger consensus rating and higher possible upside, equities research analysts plainly believe DICK’S Sporting Goods is more favorable than CarMax.

Profitability

This table compares DICK’S Sporting Goods and CarMax’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DICK’S Sporting Goods	4.71%	22.22%	7.02%
CarMax	0.84%	6.64%	1.53%

Summary

DICK’S Sporting Goods beats CarMax on 12 of the 14 factors compared between the two stocks.

About DICK’S Sporting Goods

DICK’s Sporting Goods, Inc. engages in the retailing of an extensive assortment of authentic sports equipment, apparel, footwear, and accessories. It also offers its products both online and through mobile applications. The company was founded by Richard T. Stack in 1948 and is headquartered in Coraopolis, PA.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. The company was founded in 1993 and is based in Richmond, Virginia.