America’s Car-Mart (NASDAQ: CRMT) and KAR Auction Services (NYSE:KAR) are both retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their institutional ownership, earnings, profitabiliy, analyst recommendations, dividends, valuation and risk.

Profitability

This table compares America’s Car-Mart and KAR Auction Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
America’s Car-Mart 3.43% 8.82% 4.80%
KAR Auction Services 7.16% 20.54% 4.50%

Analyst Recommendations

This is a summary of recent ratings for America’s Car-Mart and KAR Auction Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
America’s Car-Mart 0 2 1 0 2.33
KAR Auction Services 0 0 6 0 3.00

America’s Car-Mart presently has a consensus target price of $41.00, indicating a potential upside of 4.86%. KAR Auction Services has a consensus target price of $54.00, indicating a potential upside of 26.49%. Given KAR Auction Services’ stronger consensus rating and higher possible upside, analysts plainly believe KAR Auction Services is more favorable than America’s Car-Mart.

Valuation & Earnings

This table compares America’s Car-Mart and KAR Auction Services’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
America’s Car-Mart $587.75 million 0.50 $41.79 million $2.50 15.64
KAR Auction Services $3.26 billion 1.80 $762.40 million $1.66 25.72

KAR Auction Services has higher revenue and earnings than America’s Car-Mart. America’s Car-Mart is trading at a lower price-to-earnings ratio than KAR Auction Services, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

83.9% of America’s Car-Mart shares are owned by institutional investors. 11.7% of America’s Car-Mart shares are owned by company insiders. Comparatively, 1.3% of KAR Auction Services shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

KAR Auction Services pays an annual dividend of $1.28 per share and has a dividend yield of 3.0%. America’s Car-Mart does not pay a dividend. KAR Auction Services pays out 77.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KAR Auction Services has increased its dividend for 4 consecutive years.

Volatility and Risk

America’s Car-Mart has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, KAR Auction Services has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500.

Summary

KAR Auction Services beats America’s Car-Mart on 12 of the 17 factors compared between the two stocks.

America’s Car-Mart Company Profile

America’s Car-Mart, Inc. is an automotive retailer focused on the integrated auto sales and finance segment of the used car market. The Company conducts its operations through its two operating subsidiaries, America’s Car Mart, Inc. (Car-Mart of Arkansas) and Colonial Auto Finance, Inc. (Colonial) (Collectively, Car-Mart of Arkansas and Colonial are referred to as Car-Mart). It primarily sells older model used vehicles and provides financing for all of its customers. As of April 30, 2016, the Company operated 143 dealerships located primarily in small cities throughout the South-Central United States. Dealerships are operated on a decentralized basis. Each dealership is responsible for buying (with the assistance of a corporate office buyer) and selling vehicles, making credit decisions, and servicing and collecting the installment contracts it originates. Dealerships also maintain their own records and make daily deposits. The Company has both regular and satellite dealerships.

KAR Auction Services Company Profile

KAR Auction Services, Inc. is a provider of whole car auction services in North America, and salvage auction services in North America and the United Kingdom. The Company operates through three segments: ADESA, Inc. (ADESA Auctions or ADESA), Insurance Auto Auctions, Inc. (IAA) and Automotive Finance Corporation (AFC). The ADESA segment is a provider of whole car auctions and related services to the vehicle remarketing industry in North America. It serves its customer base through online auctions and auction facilities that are developed and located to draw professional sellers and buyers together, and allow the buyers to inspect and compare vehicles remotely or in person. As a provider of salvage vehicle auctions and related services, it operates as IAA in the United States and Impact Auto Auctions in Canada, and serves customer base through salvage auction locations throughout North America. The AFC segment provides floorplan financing to independent used vehicle dealers.

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