Steelcase (NYSE: SCS) and Essendant (NASDAQ:ESND) are both small-cap business services companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, profitabiliy, earnings, analyst recommendations, risk and institutional ownership.

Dividends

Steelcase pays an annual dividend of $0.51 per share and has a dividend yield of 3.7%. Essendant pays an annual dividend of $0.56 per share and has a dividend yield of 4.1%. Steelcase pays out 50.5% of its earnings in the form of a dividend. Essendant pays out -14.5% 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. Steelcase has raised its dividend for 6 consecutive years. Essendant is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Steelcase and Essendant’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Steelcase $3.05 billion 0.54 $261.10 million $1.01 13.71
Essendant $5.29 billion 0.10 $159.07 million ($3.87) -3.56

Steelcase has higher revenue, but lower earnings than Essendant. Essendant is trading at a lower price-to-earnings ratio than Steelcase, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Steelcase and Essendant’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Steelcase 4.04% 16.37% 7.17%
Essendant -2.67% 6.81% 2.28%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Steelcase and Essendant, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Steelcase 0 1 1 0 2.50
Essendant 0 2 0 0 2.00

Steelcase currently has a consensus price target of $16.00, suggesting a potential upside of 15.52%. Essendant has a consensus price target of $16.50, suggesting a potential upside of 19.83%. Given Essendant’s higher probable upside, analysts clearly believe Essendant is more favorable than Steelcase.

Volatility & Risk

Steelcase has a beta of 1.21, suggesting that its share price is 21% more volatile than the S&P 500. Comparatively, Essendant has a beta of 1.19, suggesting that its share price is 19% more volatile than the S&P 500.

Insider & Institutional Ownership

65.6% of Steelcase shares are held by institutional investors. Comparatively, 92.1% of Essendant shares are held by institutional investors. 18.9% of Steelcase shares are held by company insiders. Comparatively, 1.6% of Essendant shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Steelcase beats Essendant on 11 of the 16 factors compared between the two stocks.

About Steelcase

Steelcase Inc. provides an integrated portfolio of furniture settings, user-centered technologies and interior architectural products. The Company’s segments include Americas, EMEA and Other Category. The Company’s furniture portfolio includes panel-based and freestanding furniture systems and complementary products, such as storage, tables and ergonomic worktools. Its seating products include task chairs, which are ergonomic seating that can be used in collaborative or casual settings and specialty seating for specific vertical markets, such as healthcare and education. Its technology solutions support group collaboration by integrating furniture and technology. Its interior architectural products include full and partial height walls and doors. It also offers services, which include workplace strategy consulting, lease origination services, furniture and asset management and hosted spaces. Its family of brands includes Steelcase, Coalesse, Designtex, PolyVision and Turnstone.

About Essendant

Essendant Inc. (Essendant) is a wholesale distributor of workplace items. The Company’s product portfolio includes Janitorial, Foodservice and Breakroom Supplies (JanSan), Technology Products, Traditional Office Products, Industrial Supplies, Cut Sheet Paper Products, Automotive Products and Office Furniture. It operates principally within the United States, with additional operations in Canada and Dubai, the United Arab Emirates (UAE). As of December 31, 2016, the Company provided access to over 22,000 items in these lines: janitorial supplies (cleaners and cleaning accessories), breakroom items (food and beverage products), foodservice consumables (such as disposable cups, plates and utensils), safety and security items, and paper and packaging supplies. As of December 31, 2016, the Company provided access to approximately 11,000 items, including imaging supplies, data storage, digital cameras, computer accessories and computer hardware items, such as printers and other peripherals.

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