Analyzing CarMax (NYSE:KMX) and DICK’S Sporting Goods (NYSE:DKS)

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

Analyst Recommendations

This is a summary of recent recommendations for CarMax and DICK’S Sporting Goods, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CarMax	3	14	2	1	2.05
DICK’S Sporting Goods	1	3	12	1	2.76

CarMax currently has a consensus price target of $51.00, suggesting a potential downside of 17.93%. DICK’S Sporting Goods has a consensus price target of $258.44, suggesting a potential upside of 41.05%. Given DICK’S Sporting Goods’ stronger consensus rating and higher probable upside, analysts clearly believe DICK’S Sporting Goods is more favorable than CarMax.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
CarMax	0.84%	6.64%	1.53%
DICK’S Sporting Goods	4.71%	22.22%	7.02%

Insider & Institutional Ownership

89.8% of DICK’S Sporting Goods shares are held by institutional investors. 1.0% of CarMax shares are held by company insiders. Comparatively, 28.9% of DICK’S Sporting Goods shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility and Risk

CarMax has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500. Comparatively, DICK’S Sporting Goods has a beta of 1.21, indicating that its stock price is 21% more volatile than the S&P 500.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CarMax	$25.88 billion	0.34	$247.29 million	$1.53	40.61
DICK’S Sporting Goods	$17.22 billion	0.95	$849.24 million	$10.52	17.42

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

Summary

DICK’S Sporting Goods beats CarMax on 12 of the 14 factors compared between the two stocks.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. The company was founded in 1993 and is based in Richmond, Virginia.

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.