Rent-A-Center (NASDAQ: RCII) and Staples (NASDAQ:SPLS) are both cyclical consumer goods & services companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, profitabiliy, institutional ownership, risk, earnings, dividends and analyst recommendations.
This is a breakdown of recent recommendations and price targets for Rent-A-Center and Staples, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Rent-A-Center currently has a consensus price target of $10.75, suggesting a potential downside of 16.92%. Staples has a consensus price target of $8.83, suggesting a potential downside of 2.82%. Given Staples’ higher probable upside, analysts clearly believe Staples is more favorable than Rent-A-Center.
This table compares Rent-A-Center and Staples’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Institutional and Insider Ownership
96.8% of Rent-A-Center shares are held by institutional investors. Comparatively, 85.7% of Staples shares are held by institutional investors. 3.4% of Rent-A-Center shares are held by company insiders. Comparatively, 1.8% of Staples shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Rent-A-Center pays an annual dividend of $0.32 per share and has a dividend yield of 2.5%. Staples pays an annual dividend of $0.48 per share and has a dividend yield of 5.3%. Rent-A-Center pays out -1.9% of its earnings in the form of a dividend. Staples pays out -66.7% 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. Staples is clearly the better dividend stock, given its higher yield and lower payout ratio.
Valuation and Earnings
This table compares Rent-A-Center and Staples’ gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Rent-A-Center||$2.87 billion||0.24||$145.79 million||($16.42)||-0.79|
|Staples||$18.03 billion||0.33||$1.26 billion||($0.72)||-12.63|
Staples has higher revenue and earnings than Rent-A-Center. Staples is trading at a lower price-to-earnings ratio than Rent-A-Center, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Rent-A-Center has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, Staples has a beta of 1.78, suggesting that its stock price is 78% more volatile than the S&P 500.
Staples beats Rent-A-Center on 11 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.
Staples Company Profile
Staples, Inc. (Staples) is a provider of products and services that serve the needs of business customers and consumers. The Company offers a range of print and marketing and technology services. The Company’s segments include North American Delivery, North American Retail and Other. The North American Delivery segment consists of the United States and Canadian businesses, including Staples Business Advantage, staples.com, staples.ca, and quill.com, that sell and deliver products and services primarily to businesses. The North American Retail segment includes its retail stores in the United States and Canada. As of January 28, 2017, its North American Retail segment consisted of 1,255 stores in the United States and 304 stores in Canada. The Company has other businesses in Australia, South America and Asia. Staples Australia serves primarily contract and government customers in Australia and New Zealand. The Company also has operations in China, Argentina, Taiwan and Brazil.
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