Select Comfort Corporation (NASDAQ: SCSS) and Ethan Allen Interiors (NYSE:ETH) are both small-cap consumer discretionary companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitabiliy, analyst recommendations, valuation, institutional ownership, dividends and risk.

Risk and Volatility

Select Comfort Corporation has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500. Comparatively, Ethan Allen Interiors has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500.

Profitability

This table compares Select Comfort Corporation and Ethan Allen Interiors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Select Comfort Corporation 4.46% 44.91% 14.11%
Ethan Allen Interiors 4.74% 10.17% 7.03%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Select Comfort Corporation and Ethan Allen Interiors, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Select Comfort Corporation 0 5 2 0 2.29
Ethan Allen Interiors 0 3 1 1 2.60

Select Comfort Corporation currently has a consensus price target of $33.50, indicating a potential upside of 0.45%. Ethan Allen Interiors has a consensus price target of $33.25, indicating a potential upside of 3.74%. Given Ethan Allen Interiors’ stronger consensus rating and higher probable upside, analysts clearly believe Ethan Allen Interiors is more favorable than Select Comfort Corporation.

Earnings and Valuation

This table compares Select Comfort Corporation and Ethan Allen Interiors’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Select Comfort Corporation $1.36 billion 1.01 $147.51 million $1.35 24.70
Ethan Allen Interiors $763.39 million 1.15 $84.37 million $1.29 24.85

Select Comfort Corporation has higher revenue and earnings than Ethan Allen Interiors. Select Comfort Corporation is trading at a lower price-to-earnings ratio than Ethan Allen Interiors, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

99.8% of Select Comfort Corporation shares are held by institutional investors. Comparatively, 99.2% of Ethan Allen Interiors shares are held by institutional investors. 4.0% of Select Comfort Corporation shares are held by company insiders. Comparatively, 11.0% of Ethan Allen Interiors shares are held 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

Ethan Allen Interiors pays an annual dividend of $0.76 per share and has a dividend yield of 2.4%. Select Comfort Corporation does not pay a dividend. Ethan Allen Interiors pays out 58.9% of its earnings in the form of a dividend. Select Comfort Corporation has raised its dividend for 6 consecutive years.

About Select Comfort Corporation

Select Comfort Corporation is a designer, manufacturer, marketer, retailer and servicer of a line of Sleep Number beds. The Company offers consumers individualized sleep solutions and services, which include a complete line of Sleep Number beds, bases and bedding accessories. Its Sleep Number bed offers SleepIQ technology sensors that work directly with the bed’s DualAir technology to track each individual’s sleep. The Sleep Number bedding collection comprises a line of sleep products that are designed to solve sleep issues. It offers FlextFit adjustable bases, and Sleep Number pillows, sheets and other bedding products. It offers Sleep Number beds in ranges within the mattress category, and in a range of sizes, including twin, full, queen, eastern king and California king. It also offers an assortment of temperature-balancing products. The Company offers Sleep Number beds in series, including Classic Series, Performance Series, Innovation Series and Memory Foam Series.

About Ethan Allen Interiors

Ethan Allen Interiors Inc. is an interior design company. The Company is a manufacturer and retailer of home furnishings. The Company operates through two segments, which include wholesale and retail. The Company is an international home fashion brand doing business in North America, Europe, Asia and the Middle East. It offers complimentary interior design service to its clients and sells a range of furniture products and decorative accents through ethanallen.com and a network of design centers in the United States and abroad. Its wholesale segment, principally involved in the development of the Ethan Allen brand, encompasses various aspects of design, manufacture, sourcing, sale, and distribution of its range of home furnishings and accents. The Company’s retail segment sells home furnishings and accents to consumers through a network of Company-operated design centers. As of June 30, 2016, the Company owned and operated nine manufacturing facilities.

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