Big Lots (NYSE: BIG) and Costco Wholesale Corporation (NASDAQ:COST) are both mid-cap retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, risk, analyst recommendations, dividends, valuation, profitability and institutional ownership.

Analyst Ratings

This is a summary of recent ratings and target prices for Big Lots and Costco Wholesale Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Big Lots 0 4 7 1 2.75
Costco Wholesale Corporation 0 8 19 0 2.70

Big Lots currently has a consensus target price of $57.73, indicating a potential upside of 16.90%. Costco Wholesale Corporation has a consensus target price of $178.83, indicating a potential upside of 10.15%. Given Big Lots’ stronger consensus rating and higher possible upside, research analysts plainly believe Big Lots is more favorable than Costco Wholesale Corporation.

Institutional & Insider Ownership

72.5% of Costco Wholesale Corporation shares are held by institutional investors. 1.7% of Big Lots shares are held by insiders. Comparatively, 0.7% of Costco Wholesale Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Big Lots has a beta of 0.92, indicating that its share price is 8% less volatile than the S&P 500. Comparatively, Costco Wholesale Corporation has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Dividends

Big Lots pays an annual dividend of $1.00 per share and has a dividend yield of 2.0%. Costco Wholesale Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 1.2%. Big Lots pays out 26.0% of its earnings in the form of a dividend. Costco Wholesale Corporation pays out 34.7% 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. Big Lots has increased its dividend for 2 consecutive years and Costco Wholesale Corporation has increased its dividend for 13 consecutive years. Big Lots is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Big Lots and Costco Wholesale Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Big Lots 3.31% 30.32% 11.10%
Costco Wholesale Corporation 2.06% 20.45% 6.88%

Earnings & Valuation

This table compares Big Lots and Costco Wholesale Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Big Lots $5.20 billion 0.41 $380.71 million $3.84 12.86
Costco Wholesale Corporation $123.28 billion 0.58 $5.19 billion $5.77 28.14

Costco Wholesale Corporation has higher revenue and earnings than Big Lots. Big Lots is trading at a lower price-to-earnings ratio than Costco Wholesale Corporation, indicating that it is currently the more affordable of the two stocks.

About Big Lots

Big Lots, Inc. is a non-traditional, discount retailer operating in the United States. As of January 28, 2017, the Company operated a total of 1,432 stores. The Company operates through the discount retailing segment. As of January 28, 2017, the Company’s stores are located at various states of the United States, such as Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Michigan, Montana, Nevada, Nebraska, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, Texas, Utah and Washington. The Company’s merchandise categories include Furniture, Seasonal, Soft Home, Food, Consumables, Hard Home, and Electronics, Toys, & Accessories.

About Costco Wholesale Corporation

Costco Wholesale Corporation is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea. As of August 28, 2016, the Company operated 715 warehouses across the world. The Company’s average warehouse space is approximately 144,000 square feet. The Company’s warehouses on average operate on a seven-day, 70-hour week. The Company offers merchandise in various categories, which include foods (including dry foods, packaged foods and groceries); sundries (including snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies); hardlines (including appliances, electronics, health and beauty aids, hardware, and garden and patio); fresh foods (including meat, produce, deli and bakery); softlines (including apparel and small appliances), and other (including gas stations and pharmacy).

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