Head to Head Review: CDK Global (CDK) and Ritchie Bros. Auctioneers (RBA)

CDK Global (NASDAQ: CDK) and Ritchie Bros. Auctioneers (NYSE:RBA) are both mid-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, analyst recommendations, profitability, institutional ownership and valuation.

Insider & Institutional Ownership

87.0% of CDK Global shares are held by institutional investors. Comparatively, 95.3% of Ritchie Bros. Auctioneers shares are held by institutional investors. 0.4% of CDK Global shares are held by company insiders. Comparatively, 1.3% of Ritchie Bros. Auctioneers shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares CDK Global and Ritchie Bros. Auctioneers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CDK Global $2.22 billion 3.78 $295.60 million $2.43 26.23
Ritchie Bros. Auctioneers $610.52 million 5.93 $75.02 million $0.81 41.62

CDK Global has higher revenue and earnings than Ritchie Bros. Auctioneers. CDK Global is trading at a lower price-to-earnings ratio than Ritchie Bros. Auctioneers, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares CDK Global and Ritchie Bros. Auctioneers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CDK Global 14.99% -361.64% 14.67%
Ritchie Bros. Auctioneers 10.96% 12.50% 4.42%

Dividends

CDK Global pays an annual dividend of $0.60 per share and has a dividend yield of 0.9%. Ritchie Bros. Auctioneers pays an annual dividend of $0.68 per share and has a dividend yield of 2.0%. CDK Global pays out 24.7% of its earnings in the form of a dividend. Ritchie Bros. Auctioneers pays out 84.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ritchie Bros. Auctioneers has increased its dividend for 15 consecutive years. Ritchie Bros. Auctioneers is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

CDK Global has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500. Comparatively, Ritchie Bros. Auctioneers has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for CDK Global and Ritchie Bros. Auctioneers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CDK Global 0 2 2 0 2.50
Ritchie Bros. Auctioneers 2 7 2 0 2.00

CDK Global presently has a consensus target price of $75.50, indicating a potential upside of 18.47%. Ritchie Bros. Auctioneers has a consensus target price of $31.89, indicating a potential downside of 5.40%. Given CDK Global’s stronger consensus rating and higher possible upside, research analysts clearly believe CDK Global is more favorable than Ritchie Bros. Auctioneers.

Summary

CDK Global beats Ritchie Bros. Auctioneers on 9 of the 16 factors compared between the two stocks.

About CDK Global

CDK Global, Inc. provides integrated information technology and digital marketing solutions to the automotive retail and other industries worldwide. The company operates through Retail Solutions North America, Advertising North America, and CDK International segments. It offers technology-based solutions, including automotive Website platforms; and advertising solutions comprising the management of digital advertising spend for original equipment manufacturers and automotive retailers. The company's solutions automate and integrate various parts of the dealership and buying process from targeted digital advertising and marketing campaigns to the sale, financing, insuring, parts supply, repair, and maintenance of vehicles. It provides solutions to dealers serving approximately 28,000 retail locations and automotive manufacturers. CDK Global, Inc. is headquartered in Hoffman Estates, Illinois.

About Ritchie Bros. Auctioneers

Ritchie Bros. Auctioneers Incorporated, an asset management and disposition company, sells industrial equipment and other durable assets through its unreserved auctions, online marketplaces, listing services, and private brokerage services. The company sells a range of used and unused equipment, including earthmoving equipment, truck trailers, government surplus, oil and gas equipment, and other industrial assets. It also provides auction technology services for online bidding at live on site auctions. The company primarily sells equipment to its customers through unreserved auctions at 45 auction sites worldwide. Ritchie Bros. Auctioneers Incorporated was founded in 1958 and is headquartered in Burnaby, Canada.

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