Aaron’s, (NYSE: AAN) and Best Buy Co. (NYSE:BBY) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, valuation, dividends, profitabiliy, earnings, institutional ownership and risk.

Insider & Institutional Ownership

99.8% of Aaron’s, shares are owned by institutional investors. Comparatively, 93.9% of Best Buy Co. shares are owned by institutional investors. 1.9% of Aaron’s, shares are owned by company insiders. Comparatively, 0.8% of Best Buy Co. shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Aaron’s, and Best Buy Co.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aaron’s, 4.47% 11.81% 6.74%
Best Buy Co. 3.01% 26.81% 8.73%

Risk and Volatility

Aaron’s, has a beta of 0.14, meaning that its share price is 86% less volatile than the S&P 500. Comparatively, Best Buy Co. has a beta of 1.44, meaning that its share price is 44% more volatile than the S&P 500.

Dividends

Aaron’s, pays an annual dividend of $0.11 per share and has a dividend yield of 0.3%. Best Buy Co. pays an annual dividend of $1.36 per share and has a dividend yield of 2.4%. Aaron’s, pays out 5.6% of its earnings in the form of a dividend. Best Buy Co. pays out 36.5% 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. Aaron’s, has increased its dividend for 5 consecutive years and Best Buy Co. has increased its dividend for 10 consecutive years. Best Buy Co. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Aaron’s, and Best Buy Co.’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aaron’s, $3.20 billion 0.88 $467.52 million $1.97 20.30
Best Buy Co. $39.49 billion 0.43 $2.45 billion $3.73 15.06

Best Buy Co. has higher revenue and earnings than Aaron’s, . Best Buy Co. is trading at a lower price-to-earnings ratio than Aaron’s, , indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Aaron’s, and Best Buy Co., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aaron’s, 0 3 3 0 2.50
Best Buy Co. 3 2 17 0 2.64

Aaron’s, presently has a consensus price target of $37.00, indicating a potential downside of 7.48%. Best Buy Co. has a consensus price target of $56.94, indicating a potential upside of 1.37%. Given Best Buy Co.’s stronger consensus rating and higher probable upside, analysts clearly believe Best Buy Co. is more favorable than Aaron’s, .

Summary

Best Buy Co. beats Aaron’s, on 11 of the 17 factors compared between the two stocks.

About Aaron’s,

Aaron’s, Inc. (Aaron’s) is an omnichannel provider of lease-purchase solutions. The Company engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its Company-operated and franchised stores in Canada, as well as its e-commerce platform, Aarons.com. Its segments include Sales and Lease Ownership, Progressive Finance Holdings, LLC (Progressive), Dent-A-Med, Inc., doing business as the HELPcard (DAMI), Franchise and Manufacturing. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, Ashley and Magnavox. As of December 31, 2016, it had 1,864 Aaron’s stores, consisted of 1,165 Company-operated stores in 28 states, the District of Columbia and Canada, and 699 independently-owned franchised stores in 46 states and Canada. It owns trademarks and trade names used in business, including Progressive, Dent-A-Med, the HELPcard and Woodhaven Furniture Industries.

About Best Buy Co.

Best Buy Co., Inc. is a provider of technology products, services and solutions. The Company offers products and services to the customers visiting its stores, engaging with Geek Squad agents, or using its Websites or mobile applications. It has operations in the United States, Canada and Mexico. The Company operates through two segments: Domestic and International. The Domestic segment consists of the operations in all states, districts and territories of the United States, under various brand names, including Best Buy, bestbuy.com, Best Buy Mobile, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, and Pacific Kitchen and Home. The International segment consists of all operations in Canada and Mexico under the brand names, Best Buy, bestbuy.com.ca, bestbuy.com.mx, Best Buy Express, Best Buy Mobile and Geek Squad. As of December 31, 2016, the Company operated 1,200 large-format and 400 small-format stores throughout its Domestic and International segments.

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