Rocky Mountain Chocolate Factory (NASDAQ: RMCF) and Hershey Company (The) (NYSE:HSY) are both retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their profitabiliy, institutional ownership, earnings, valuation, dividends, analyst recommendations and risk.

Profitability

This table compares Rocky Mountain Chocolate Factory and Hershey Company (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rocky Mountain Chocolate Factory 9.01% 18.35% 11.54%
Hershey Company (The) 8.21% 117.02% 17.80%

Institutional & Insider Ownership

38.5% of Rocky Mountain Chocolate Factory shares are held by institutional investors. Comparatively, 51.4% of Hershey Company (The) shares are held by institutional investors. 15.3% of Rocky Mountain Chocolate Factory shares are held by company insiders. Comparatively, 0.9% of Hershey Company (The) 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.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Rocky Mountain Chocolate Factory and Hershey Company (The), as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rocky Mountain Chocolate Factory 0 2 0 0 2.00
Hershey Company (The) 2 11 4 0 2.12

Rocky Mountain Chocolate Factory currently has a consensus price target of $8.75, suggesting a potential downside of 25.53%. Hershey Company (The) has a consensus price target of $108.44, suggesting a potential downside of 1.25%. Given Hershey Company (The)’s stronger consensus rating and higher possible upside, analysts plainly believe Hershey Company (The) is more favorable than Rocky Mountain Chocolate Factory.

Dividends

Rocky Mountain Chocolate Factory pays an annual dividend of $0.48 per share and has a dividend yield of 4.1%. Hershey Company (The) pays an annual dividend of $2.47 per share and has a dividend yield of 2.2%. Rocky Mountain Chocolate Factory pays out 84.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hershey Company (The) pays out 86.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hershey Company (The) has increased its dividend for 7 consecutive years. Rocky Mountain Chocolate Factory is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Rocky Mountain Chocolate Factory and Hershey Company (The)’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Rocky Mountain Chocolate Factory $38.30 million 1.80 $6.87 million $0.57 20.61
Hershey Company (The) $7.49 billion 3.12 $1.72 billion $2.87 38.26

Hershey Company (The) has higher revenue and earnings than Rocky Mountain Chocolate Factory. Rocky Mountain Chocolate Factory is trading at a lower price-to-earnings ratio than Hershey Company (The), indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Rocky Mountain Chocolate Factory has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500. Comparatively, Hershey Company (The) has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Summary

Hershey Company (The) beats Rocky Mountain Chocolate Factory on 12 of the 17 factors compared between the two stocks.

About Rocky Mountain Chocolate Factory

Rocky Mountain Chocolate Factory, Inc. is an international franchisor, confectionery manufacturer and retail operator. The Company’s subsidiary, U-Swirl International, Inc. (U-Swirl), franchises and operates soft-serve frozen yogurt stores. The Company operates through five segments: Franchising, Manufacturing, Retail Stores, U-Swirl operations and Other. The Company manufactures a range of chocolate candies and other confectionery products. The Company’s franchised/license system of retail stores features chocolate, frozen yogurt and other confectionary products. The Company also sells its candy in selected locations outside of its system of retail stores and licenses the use of its brand with certain consumer products. The Company’s products include a range of clusters, caramels, creams, mints and truffles. Its individual stores also offer over 15 fudges and other products prepared in the store. The Company uses chocolate, nut meats and other ingredients in its candies.

About Hershey Company (The)

The Hershey Company is a producer of chocolate in North America. The Company’s principal product offerings include chocolate and non-chocolate confectionery products; gum and mint refreshment products; pantry items, such as baking ingredients and beverages, and snack items, such as spreads, meat snacks, bars and snack bites and mixes. Its segments include North America, and International and Other. The North America segment includes its chocolate and non-chocolate confectionery business, as well as its grocery and snacks business. This includes developing and growing its business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines. The Company distributes and sells confectionery products in export markets of Asia, Latin America, the Middle East, Europe, Africa and other regions. As of December 31, 2016, the Company marketed, sold and distributed its products under more than 80 brand names in approximately 70 countries across the world.

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