Critical Review: Ferguson (NASDAQ:FERG) vs. Tractor Supply (NASDAQ:TSCO)

Tractor Supply (NASDAQ:TSCO) and Ferguson (NASDAQ:FERG) are both large-cap retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, valuation, dividends, profitability and analyst recommendations.

Institutional and Insider Ownership

88.6% of Tractor Supply shares are owned by institutional investors. Comparatively, 35.2% of Ferguson shares are owned by institutional investors. 0.7% of Tractor Supply shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Tractor Supply pays an annual dividend of $2.08 per share and has a dividend yield of 1.1%. Ferguson pays an annual dividend of $1.46 per share and has a dividend yield of 1.1%. Tractor Supply pays out 30.3% of its earnings in the form of a dividend. Ferguson pays out 22.5% 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. Tractor Supply has raised its dividend for 10 consecutive years. Tractor Supply is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Tractor Supply and Ferguson, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tractor Supply 0 12 8 1 2.48
Ferguson 1 6 2 0 2.11

Tractor Supply presently has a consensus target price of $184.80, indicating a potential upside of 1.38%. Given Tractor Supply’s stronger consensus rating and higher possible upside, analysts plainly believe Tractor Supply is more favorable than Ferguson.

Valuation and Earnings

This table compares Tractor Supply and Ferguson’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Tractor Supply $10.62 billion 1.98 $748.96 million $6.87 26.53
Ferguson $27.54 billion 1.10 $961.00 million $6.50 20.78

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

Profitability

This table compares Tractor Supply and Ferguson’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tractor Supply 7.39% 49.20% 12.97%
Ferguson N/A N/A N/A

Risk and Volatility

Tractor Supply has a beta of 1.04, indicating that its stock price is 4% more volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.34, indicating that its stock price is 34% more volatile than the S&P 500.

Summary

Tractor Supply beats Ferguson on 14 of the 18 factors compared between the two stocks.

Tractor Supply Company Profile

Tractor Supply Company operates as a rural lifestyle retailer in the United States. The company offers a selection of merchandise, including equine, livestock, pet, and small animal products necessary for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal products, such as heating products, lawn and garden items, power equipment, gifts, and toys; work/recreational clothing and footwear; and maintenance products for agricultural and rural use. It provides its products under the 4health, Producer's Pride, American Farmworks, Red Shed, Bit & Bridle, Redstone, Blue Mountain, Retriever, C.E. Schmidt, Ridgecut, Countyline, Royal Wing, Dumor, Strive, Groundwork, Traveller, Huskee, Treeline, JobSmart, TSC Tractor Supply Co, Paws & Claws, and Untamed brands. As of December 26, 2020, it operated 1,923 Tractor Supply and Del's retail stores in 49 states, as well as 182 Petsense stores in 25 states. The company operates its retail stores under the Tractor Supply Company, Del's Feed & Farm Supply, and Petsense names. It also operates websites under the TractorSupply.com and Petsense.com names. The company sells its products to recreational farmers, ranchers, and others, as well as tradesmen and small businesses. The company was founded in 1938 and is based in Brentwood, Tennessee.

Ferguson Company Profile

Ferguson plc distributes plumbing and heating products in the United States, the United Kingdom, Canada, and Central Europe. It offers plumbing and heating solutions to customers in the residential, municipal, civil and industrial markets, and commercial sectors for repair, maintenance, and improvement (RMI), as well as new construction markets. The company also distributes pipes, valves, fittings, hydrants, meters, and related water management products, as well as offers related services, such as water line tapping and pipe fusion services. In addition, it distributes heating, ventilation, air conditioning, refrigeration equipment, and parts and supplies to specialist contractors in the residential and commercial markets for repair and replacement; and PVF products to industrial customers. Further, the company fabricates and supplies fire protection systems and bespoke fabrication services to commercial contractors for new construction and renovation projects, as well as offers products, services, and solutions to enable maintenance of facilities across various RMI markets. Additionally, it offers supply chain management solutions for PVF; and industrial maintenance, repair, and operations specializing in delivering automation, instrumentation, engineered products, and turn-key solutions. The company also sells its home improvement products directly to consumers, as well as through a network of online stores. In addition, it operates its B2B business primarily under the Ferguson brand; and B2C business under the Build.com brand. Further, the company provides products and services for maintenance of multi-family properties, government agencies, hospitality, education, healthcare, and other facilities. It operates a network of 2,194 branches and 19 distribution centers. Ferguson plc was founded in 1887 and is headquartered in Wokingham, the United Kingdom.

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