The Advisory Board (NASDAQ: ABCO) and Ritchie Bros. Auctioneers (NYSE:RBA) are both mid-cap industrials companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Dividends

Ritchie Bros. Auctioneers pays an annual dividend of $0.68 per share and has a dividend yield of 2.3%. The Advisory Board does not pay a dividend. Ritchie Bros. Auctioneers pays out 111.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ritchie Bros. Auctioneers has raised its dividend for 14 consecutive years.

Institutional & Insider Ownership

95.5% of The Advisory Board shares are held by institutional investors. Comparatively, 96.6% of Ritchie Bros. Auctioneers shares are held by institutional investors. 4.7% of The Advisory Board shares are held by company insiders. Comparatively, 0.4% of Ritchie Bros. Auctioneers shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares The Advisory Board and Ritchie Bros. Auctioneers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Advisory Board -3.42% 0.48% -1.23%
Ritchie Bros. Auctioneers 11.43% 13.04% 4.87%

Analyst Recommendations

This is a summary of current ratings for The Advisory Board and Ritchie Bros. Auctioneers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Advisory Board 0 11 3 0 2.21
Ritchie Bros. Auctioneers 2 5 5 0 2.25

The Advisory Board currently has a consensus target price of $51.44, suggesting a potential downside of 4.43%. Ritchie Bros. Auctioneers has a consensus target price of $29.45, suggesting a potential downside of 0.34%. Given Ritchie Bros. Auctioneers’ stronger consensus rating and higher probable upside, analysts clearly believe Ritchie Bros. Auctioneers is more favorable than The Advisory Board.

Earnings and Valuation

This table compares The Advisory Board and Ritchie Bros. Auctioneers’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
The Advisory Board $803.42 million 2.73 $91.23 million $1.74 30.93
Ritchie Bros. Auctioneers $566.40 million 5.59 $91.83 million $0.61 48.44

Ritchie Bros. Auctioneers has lower revenue, but higher earnings than The Advisory Board. The Advisory Board is trading at a lower price-to-earnings ratio than Ritchie Bros. Auctioneers, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

The Advisory Board has a beta of 1.34, meaning that its stock price is 34% more volatile than the S&P 500. Comparatively, Ritchie Bros. Auctioneers has a beta of 0.64, meaning that its stock price is 36% less volatile than the S&P 500.

Summary

Ritchie Bros. Auctioneers beats The Advisory Board on 12 of the 17 factors compared between the two stocks.

About The Advisory Board

The Advisory Board Company is a provider of software and solutions to the healthcare and higher education industries. The Company offers subscription-based membership programs, software and data-enabled services. All of its programs are rooted in best practices and extends across four areas, including Best practices research, Technology, Data-enabled services and Consulting services. The best practices research and insight programs provide the foundation for all of its other programs. The Company offers technology analytics programs anchored by cloud-based software applications that surface performance improvement opportunities to accelerate progress. Through its consulting services, the Company provides on-the-ground support for performance improvement initiatives, as well as best practice professional management of areas of the hospital or medical group. The Company’s data-enabled services are primarily focused in the area of enrollment management.

About Ritchie Bros. Auctioneers

Ritchie Bros Auctioneers Inc is a Canada-based holding company. The Company is an industrial auctioneer and used equipment distributor, selling used equipment and other assets. Its segments include Core Auction, which is a network of auction locations that conduct live, unreserved auctions with both on-site and online bidding, and Other, which includes its EquipmentOne and Mascus International Holding B.V. (Mascus) online services. EquipmentOne is an online marketplace that equipment sellers can navigate independently. EquipmentOne facilitates the completion of sales through a settlement process managed by EquipmentOne that protects both the seller and the buyer. Mascus is an online equipment listing service for used heavy machinery and trucks. It offers subscriptions to equipment dealers, brokers, exporters and equipment manufacturers to list equipment available for sale at a listed price. The Company, through Mascus, provides online advertising services, business tools and solutions.

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