Stage Stores (NYSE: SSI) and Ross Stores (NASDAQ:ROST) are both retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Dividends

Stage Stores pays an annual dividend of $0.20 per share and has a dividend yield of 12.2%. Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 1.0%. Stage Stores pays out -11.4% of its earnings in the form of a dividend. Ross Stores pays out 21.1% 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. Stage Stores has raised its dividend for 10 consecutive years and Ross Stores has raised its dividend for 7 consecutive years. Stage Stores is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Stage Stores and Ross Stores’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Stage Stores $1,442.72 0.03 -$37.89 ($1.76) -0.93
Ross Stores $12.87 billion 1.93 $1.12 billion $3.03 21.22

Ross Stores has higher revenue and earnings than Stage Stores. Stage Stores is trading at a lower price-to-earnings ratio than Ross Stores, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations for Stage Stores and Ross Stores, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stage Stores 1 2 0 0 1.67
Ross Stores 0 7 13 0 2.65

Stage Stores currently has a consensus target price of $2.00, indicating a potential upside of 21.95%. Ross Stores has a consensus target price of $70.71, indicating a potential upside of 9.96%. Given Stage Stores’ higher possible upside, equities research analysts plainly believe Stage Stores is more favorable than Ross Stores.

Institutional & Insider Ownership

62.1% of Stage Stores shares are held by institutional investors. Comparatively, 90.4% of Ross Stores shares are held by institutional investors. 7.4% of Stage Stores shares are held by insiders. Comparatively, 2.3% of Ross Stores shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Stage Stores and Ross Stores’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stage Stores -3.27% -7.78% -3.29%
Ross Stores 8.87% 42.95% 21.77%

Risk & Volatility

Stage Stores has a beta of 1.16, meaning that its share price is 16% more volatile than the S&P 500. Comparatively, Ross Stores has a beta of 1.1, meaning that its share price is 10% more volatile than the S&P 500.

Summary

Ross Stores beats Stage Stores on 10 of the 16 factors compared between the two stocks.

About Stage Stores

Stage Stores, Inc. operates specialty department stores mainly in small and mid-sized towns and communities. The Company’s department stores offer a range of brand name and private label apparel, accessories, cosmetics, footwear and home goods. The Company operates approximately 830 specialty department stores in over 40 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business. The Company’s direct-to-consumer business consists of its e-commerce Website and Send program. The Company’s e-commerce Website includes a range of merchandise categories found in its stores, as well as other product offerings. The Company’s in-store Send program allows customers to have merchandise shipped directly to their homes if the preferred size or color is not available in their local store. The Company’s private label portfolio brands are developed and sourced through agreements with third-party vendors.

About Ross Stores

Ross Stores, Inc. and its subsidiaries operate two brands of off-price retail apparel and home fashion stores-Ross Dress for Less (Ross) and dd’s DISCOUNTS. The Company is the off-price apparel and home fashion chain in the United States, with 1,340 locations in 36 states, the District of Columbia and Guam, as of January 28, 2017. The Company offers in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. The Company also operated 193 dd’s DISCOUNTS stores in 15 states as of January 28, 2017. As of January 28, 2017, the Company operated a total of 1,533 stores consisted of 1,340 Ross stores and 193 dd’s DISCOUNTS stores. As of January 28, 2017, the Company owned and operated six distribution processing facilities-three in California, one in Pennsylvania, and two in South Carolina.

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