Staples (NASDAQ: SPLS) and Tractor Supply (NASDAQ:TSCO) are both mid-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, risk, valuation, dividends, institutional ownership, profitability and analyst recommendations.

Volatility and Risk

Staples has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500. Comparatively, Tractor Supply has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Staples -8.53% 15.09% 6.94%
Tractor Supply 7.96% 46.66% 22.25%

Institutional and Insider Ownership

85.5% of Staples shares are owned by institutional investors. Comparatively, 92.3% of Tractor Supply shares are owned by institutional investors. 0.7% of Staples shares are owned by company insiders. Comparatively, 1.2% of Tractor Supply shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock 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%. Tractor Supply pays an annual dividend of $1.08 per share and has a dividend yield of 1.8%. Staples pays out -20.4% of its earnings in the form of a dividend. Tractor Supply pays out 32.5% 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. Staples is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and target prices for Staples and Tractor Supply, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Staples 0 5 1 0 2.17
Tractor Supply 0 16 9 0 2.36

Staples presently has a consensus price target of $8.85, indicating a potential downside of 13.41%. Tractor Supply has a consensus price target of $73.50, indicating a potential upside of 23.45%. Given Tractor Supply’s stronger consensus rating and higher probable upside, analysts plainly believe Tractor Supply is more favorable than Staples.

Earnings & Valuation

This table compares Staples and Tractor Supply’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Staples $17.91 billion 0.37 $1.22 billion ($2.35) -4.35
Tractor Supply $7.04 billion 1.07 $849.82 million $3.32 17.93

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

Summary

Tractor Supply beats Staples on 10 of the 15 factors compared between the two stocks.

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.

About Tractor Supply

Tractor Supply Company is an operator of rural lifestyle retail stores in the United States. The Company is focused on supplying the needs of recreational farmers and ranchers and others, as well as tradesmen and small businesses. It is engaged in the retail sale of products that support the rural lifestyle. The Company operates retail stores under the names Tractor Supply Company, Del’s Feed & Farm Supply and Petsense, and operates Websites under the names TractorSupply.com and Petsense.com. The Company’s selection of merchandise consists of various product categories, including equine, livestock, pet and small animal products; hardware, truck, towing and tool products; seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; work/recreational clothing and footwear, and maintenance products for agricultural and rural use. Its brands include 4health, JobSmart, Bit & Bridle, Paws & Claws, Blue Mountain, Redstone, Dumor, Equistages and Royal Wing.

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