Financial Analysis: Sonic Automotive (NYSE:SAH) versus DICK’S Sporting Goods (NYSE:DKS)

DICK’S Sporting Goods (NYSE:DKS) and Sonic Automotive (NYSE:SAH) are both consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, profitability, analyst recommendations and institutional ownership.

Volatility & Risk

DICK’S Sporting Goods has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500. Comparatively, Sonic Automotive has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for DICK’S Sporting Goods and Sonic Automotive, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DICK’S Sporting Goods	1	8	12	0	2.52
Sonic Automotive	2	3	6	0	2.36

DICK’S Sporting Goods presently has a consensus price target of $170.22, indicating a potential upside of 27.92%. Sonic Automotive has a consensus price target of $97.33, indicating a potential upside of 25.03%. Given DICK’S Sporting Goods’ stronger consensus rating and higher possible upside, analysts clearly believe DICK’S Sporting Goods is more favorable than Sonic Automotive.

Dividends

DICK’S Sporting Goods pays an annual dividend of $5.00 per share and has a dividend yield of 3.8%. Sonic Automotive pays an annual dividend of $1.64 per share and has a dividend yield of 2.1%. DICK’S Sporting Goods pays out 53.7% of its earnings in the form of a dividend. Sonic Automotive pays out 26.2% 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. DICK’S Sporting Goods has increased its dividend for 11 consecutive years and Sonic Automotive has increased its dividend for 4 consecutive years. DICK’S Sporting Goods is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

89.8% of DICK’S Sporting Goods shares are owned by institutional investors. Comparatively, 46.9% of Sonic Automotive shares are owned by institutional investors. 28.9% of DICK’S Sporting Goods shares are owned by company insiders. Comparatively, 43.7% of Sonic Automotive shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares DICK’S Sporting Goods and Sonic Automotive”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DICK’S Sporting Goods	$17.22 billion	0.69	$849.24 million	$9.31	14.29
Sonic Automotive	$15.15 billion	0.16	$118.70 million	$6.27	12.42

DICK’S Sporting Goods has higher revenue and earnings than Sonic Automotive. Sonic Automotive is trading at a lower price-to-earnings ratio than DICK’S Sporting Goods, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares DICK’S Sporting Goods and Sonic Automotive’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DICK’S Sporting Goods	3.97%	19.21%	6.07%
Sonic Automotive	1.37%	20.75%	3.51%

Summary

DICK’S Sporting Goods beats Sonic Automotive on 14 of the 17 factors compared between the two stocks.

About DICK’S Sporting Goods

DICK’s Sporting Goods, Inc. engages in the retailing of an extensive assortment of authentic sports equipment, apparel, footwear, and accessories. It also offers its products both online and through mobile applications. The company was founded by Richard T. Stack in 1948 and is headquartered in Coraopolis, PA.

About Sonic Automotive

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates in three segments, Franchised Dealerships, EchoPark, and Powersports. The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products for its guests. The EchoPark segment sells used cars and light trucks; and arranges finance and insurance product sales for its guests in pre-owned vehicle specialty retail locations. The Powersports Segment sells new and used powersports vehicles, such as motorcycles, and personal watercraft and all-terrain vehicles; and offers finance and insurance services. The company was incorporated in 1997 and is based in Charlotte, North Carolina.