Shoe Carnival (NASDAQ: SCVL) and The Finish Line (NASDAQ:FINL) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitabiliy, earnings, institutional ownership, valuation, dividends and risk.

Dividends

Shoe Carnival pays an annual dividend of $0.28 per share and has a dividend yield of 1.4%. The Finish Line pays an annual dividend of $0.44 per share and has a dividend yield of 3.1%. Shoe Carnival pays out 23.5% of its earnings in the form of a dividend. The Finish Line pays out -95.7% 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. The Finish Line is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Shoe Carnival has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500. Comparatively, The Finish Line has a beta of 1.27, indicating that its stock price is 27% more volatile than the S&P 500.

Profitability

This table compares Shoe Carnival and The Finish Line’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Shoe Carnival 2.12% 7.27% 4.91%
The Finish Line -0.96% 8.71% 5.43%

Analyst Recommendations

This is a summary of current recommendations for Shoe Carnival and The Finish Line, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Shoe Carnival 0 5 0 0 2.00
The Finish Line 0 17 4 0 2.19

Shoe Carnival presently has a consensus price target of $22.50, indicating a potential upside of 11.39%. The Finish Line has a consensus price target of $18.95, indicating a potential upside of 33.64%. Given The Finish Line’s stronger consensus rating and higher possible upside, analysts clearly believe The Finish Line is more favorable than Shoe Carnival.

Insider and Institutional Ownership

65.1% of Shoe Carnival shares are held by institutional investors. 32.6% of Shoe Carnival shares are held by insiders. Comparatively, 4.0% of The Finish Line shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Shoe Carnival and The Finish Line’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Shoe Carnival $994.02 million 0.35 $62.91 million $1.19 16.97
The Finish Line $1.84 billion 0.31 $120.58 million ($0.46) -30.83

The Finish Line has higher revenue and earnings than Shoe Carnival. The Finish Line is trading at a lower price-to-earnings ratio than Shoe Carnival, indicating that it is currently the more affordable of the two stocks.

Summary

The Finish Line beats Shoe Carnival on 10 of the 15 factors compared between the two stocks.

About Shoe Carnival

Shoe Carnival, Inc. is a family footwear retailer. The Company’s primary activity is the sale of footwear and related products through its retail stores in approximately 30 states within the continental United States and in Puerto Rico. It also offers online shopping on its e-commerce site at www.shoecarnival.com. Its products assortment includes dress and casual shoes, sandals, boots and an assortment of athletic for the entire family in four general categories-women’s, men’s, children’s and athletics. In addition to footwear, its stores carry selected accessory items, such as socks, belts, shoe care items, handbags, sport bags, backpacks, jewelry, scarves and wallets. It classifies athletic shoes by functionality, such as running, basketball or fitness shoes. As of January 28, 2017, it operated 415 stores in 35 states and Puerto Rico and offered online shopping at www.shoecarnival.com.

About The Finish Line

The Finish Line, Inc. is a specialty retailer. The Company is a retailer of athletic shoes, apparel and accessories for men, women and kids, throughout the United States and Puerto Rico. The Company operates through the Finish Line brand. Finish Line is a retailer of athletic shoes, apparel and accessories. The Company has approximately 970 Finish Line branded locations primarily in the United States malls and shops inside Macy’s department stores. In addition, Finish Line operates an e-commerce site, www.finishline.com, as well as mobile commerce through m.finishline.com. Finish Line carries a selection of men’s, women’s and kids’ athletic shoes (footwear), as well as an assortment of apparel and accessories (softgoods). Brand names offered by Finish Line include Nike, Brand Jordan, adidas, Under Armour and Puma.

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