Rent-A-Center (NASDAQ: RCII) and West Marine (NASDAQ:WMAR) are both small-cap consumer discretionary companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, valuation, earnings, profitability and risk.

Volatility & Risk

Rent-A-Center has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500. Comparatively, West Marine has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500.

Valuation & Earnings

This table compares Rent-A-Center and West Marine’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Rent-A-Center $2.80 billion 0.24 $104.70 million ($2.94) -4.24
West Marine $697.67 million 0.47 $39.13 million $0.31 41.78

Rent-A-Center has higher revenue and earnings than West Marine. Rent-A-Center is trading at a lower price-to-earnings ratio than West Marine, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Rent-A-Center and West Marine, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rent-A-Center 2 3 2 1 2.25
West Marine 0 3 0 0 2.00

Rent-A-Center currently has a consensus price target of $11.00, indicating a potential downside of 11.86%. West Marine has a consensus price target of $9.99, indicating a potential downside of 22.86%. Given Rent-A-Center’s stronger consensus rating and higher possible upside, analysts plainly believe Rent-A-Center is more favorable than West Marine.

Dividends

Rent-A-Center pays an annual dividend of $0.32 per share and has a dividend yield of 2.6%. West Marine pays an annual dividend of $0.20 per share and has a dividend yield of 1.5%. Rent-A-Center pays out -10.9% of its earnings in the form of a dividend. West Marine pays out 64.5% 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. Rent-A-Center is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

57.9% of West Marine shares are held by institutional investors. 3.4% of Rent-A-Center shares are held by insiders. Comparatively, 27.5% of West Marine shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Rent-A-Center and West Marine’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rent-A-Center -5.57% 3.87% 0.78%
West Marine 1.15% 2.56% 1.83%

Summary

Rent-A-Center beats West Marine on 9 of the 16 factors compared between the two stocks.

Rent-A-Center Company Profile

Rent-A-Center, Inc. is a rent-to-own operator in North America. The Company provides an opportunity to obtain ownership of products, such as consumer electronics, appliances, computers (including tablets), smartphones and furniture (including accessories), under rental purchase agreements. The Company operates in four segments: Core U.S., Acceptance Now, Mexico, and Franchising. As of December 31, 2016, the Company operated over 2,463 Company-owned stores in the United States, Canada and Puerto Rico. The Company’s Mexico segment consists of the Company-owned rent-to-own stores in Mexico. As of December 31, 2016, the Company operated 130 stores in this segment. Its Franchising segment engages in the sale of rental merchandise to its franchisees. As of December 31, 2016, the Company’s Franchising segment franchised 229 stores in 31 states operating under the Rent-A-Center (152 stores), ColorTyme (39 stores) and RimTyme (38 stores) names.

West Marine Company Profile

West Marine, Inc. is a waterlife outfitter for cruisers, sailors, anglers and paddlesports enthusiasts. The Company offers a selection of core boating and water recreation products, primarily serving the needs of boat owners and professionals providing services to them. It services its customers through physical stores and two e-commerce Websites. It is a specialty retailer of boating supplies, gear, apparel, footwear and other waterlife-related products. It operates approximately 260 stores located in approximately 40 states, Puerto Rico and Canada. Its products include boating products and merchandise expansion products. Its boating products include maintenance, electronics, sailboat hardware, anchors/docking/moorings, engine systems, boats/outboards, ventilation, navigation, trailering, seating/boat covers and barbecues/appliances. Its merchandise expansion products include clothing accessories, fishing, watersports, paddlesports, coolers and waterlife lifestyle accessories.

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