Financial Analysis: Conn’s (CONN) and Best Buy (BBY)

Conn’s (NASDAQ: CONN) and Best Buy (NYSE:BBY) are both retail/wholesale companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, profitability, risk and earnings.

Valuation & Earnings

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This table compares Conn’s and Best Buy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Conn’s $1.52 billion 0.55 $6.46 million $0.95 27.84
Best Buy $42.15 billion 0.51 $1.00 billion $4.42 16.59

Best Buy has higher revenue and earnings than Conn’s. Best Buy is trading at a lower price-to-earnings ratio than Conn’s, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and target prices for Conn’s and Best Buy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Conn’s 0 1 5 0 2.83
Best Buy 3 9 7 0 2.21

Conn’s currently has a consensus price target of $37.80, indicating a potential upside of 42.91%. Best Buy has a consensus price target of $70.06, indicating a potential downside of 4.47%. Given Conn’s’ stronger consensus rating and higher possible upside, analysts plainly believe Conn’s is more favorable than Best Buy.

Profitability

This table compares Conn’s and Best Buy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Conn’s 0.43% 5.72% 1.57%
Best Buy 2.37% 32.68% 10.01%

Volatility and Risk

Conn’s has a beta of 1.71, meaning that its share price is 71% more volatile than the S&P 500. Comparatively, Best Buy has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Institutional and Insider Ownership

68.4% of Conn’s shares are held by institutional investors. Comparatively, 85.2% of Best Buy shares are held by institutional investors. 3.5% of Conn’s shares are held by insiders. Comparatively, 1.2% of Best Buy shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Best Buy pays an annual dividend of $1.80 per share and has a dividend yield of 2.5%. Conn’s does not pay a dividend. Best Buy pays out 40.7% of its earnings in the form of a dividend. Best Buy has raised its dividend for 6 consecutive years.

Summary

Best Buy beats Conn’s on 10 of the 17 factors compared between the two stocks.

Conn’s Company Profile

Conn's, Inc. operates as a specialty retailer of durable consumer goods and related services in the United States. It operates through two segments, Retail and Credit. The company's stores provide furniture and mattress, including furniture and related accessories for the living room, dining room, and bedroom, as well as traditional and specialty mattresses; home appliances comprising refrigerators, freezers, washers, dryers, dishwashers, and ranges; and home office products consisting of computers, printers, and accessories. Its stores also offer consumer electronics, such as LED, OLED, Ultra HD, and Internet-ready televisions; and Blu-ray players, and home theater and portable audio equipment. The company also provides short- and medium-term financing to its retail customers, as well as offers product support services, such as product repair services, repair service agreements, and various credit insurance products. As of January 31, 2017, it operated 113 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas. Conn's, Inc. was founded in 1890 and is based in The Woodlands, Texas.

Best Buy Company Profile

Best Buy Co., Inc. is a provider of technology products, services and solutions. The Company offers products and services to the customers visiting its stores, engaging with Geek Squad agents, or using its Websites or mobile applications. It has operations in the United States, Canada and Mexico. The Company operates through two segments: Domestic and International. The Domestic segment consists of the operations in all states, districts and territories of the United States, under various brand names, including Best Buy, bestbuy.com, Best Buy Mobile, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, and Pacific Kitchen and Home. The International segment consists of all operations in Canada and Mexico under the brand names, Best Buy, bestbuy.com.ca, bestbuy.com.mx, Best Buy Express, Best Buy Mobile and Geek Squad. As of December 31, 2016, the Company operated 1,200 large-format and 400 small-format stores throughout its Domestic and International segments.

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