Sally Beauty Holdings (NYSE: SBH) and Staples (NASDAQ:SPLS) are both mid-cap retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

85.6% of Staples shares are owned by institutional investors. 1.0% of Sally Beauty Holdings shares are owned by company insiders. Comparatively, 0.7% of Staples shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Staples pays an annual dividend of $0.48 per share and has a dividend yield of 4.7%. Sally Beauty Holdings does not pay a dividend. Staples pays out -20.4% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Sally Beauty Holdings and Staples, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sally Beauty Holdings 1 9 2 0 2.08
Staples 0 5 1 0 2.17

Sally Beauty Holdings presently has a consensus target price of $24.22, suggesting a potential upside of 23.71%. Staples has a consensus target price of $8.85, suggesting a potential downside of 13.66%. Given Sally Beauty Holdings’ higher possible upside, equities analysts clearly believe Sally Beauty Holdings is more favorable than Staples.

Valuation & Earnings

This table compares Sally Beauty Holdings and Staples’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sally Beauty Holdings $3.94 billion 0.66 $603.02 million $1.64 11.94
Staples $17.91 billion 0.38 $1.22 billion ($2.35) -4.36

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

Profitability

This table compares Sally Beauty Holdings and Staples’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sally Beauty Holdings 5.89% -80.60% 11.83%
Staples -8.53% 15.09% 6.94%

Volatility and Risk

Sally Beauty Holdings has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500. Comparatively, Staples has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500.

Summary

Staples beats Sally Beauty Holdings on 8 of the 15 factors compared between the two stocks.

About Sally Beauty Holdings

Sally Beauty Holdings, Inc. is an international specialty retailer and distributor of professional beauty supplies with operations primarily in North America, South America and Europe. The Company operates through two business segments: Sally Beauty Supply and Beauty Systems Group (BSG). Sally Beauty Supply is a domestic and international chain of cash and carry retail stores, which offers professional beauty supplies to both salon professionals and retail customers primarily in North America, Puerto Rico, and parts of Europe and South America. BSG, including its franchise-based business Armstrong McCall, is a full service beauty supply distributor, which offers professional brands of beauty products directly to salons and salon professionals through its own sales force and professional-only stores (including franchise stores) in partially exclusive geographical territories in North America and parts of Europe.

About Staples

Staples, Inc. (Staples) is a provider of products and services that serve the needs of business customers and consumers. The Company offers a range of print and marketing and technology services. The Company’s segments include North American Delivery, North American Retail and Other. The North American Delivery segment consists of the United States and Canadian businesses, including Staples Business Advantage, staples.com, staples.ca, and quill.com, that sell and deliver products and services primarily to businesses. The North American Retail segment includes its retail stores in the United States and Canada. As of January 28, 2017, its North American Retail segment consisted of 1,255 stores in the United States and 304 stores in Canada. The Company has other businesses in Australia, South America and Asia. Staples Australia serves primarily contract and government customers in Australia and New Zealand. The Company also has operations in China, Argentina, Taiwan and Brazil.

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