Critical Survey: Sonic Automotive (NYSE:SAH) and Urban Outfitters (NASDAQ:URBN)

Urban Outfitters (NASDAQ:URBN) and Sonic Automotive (NYSE:SAH) are both mid-cap consumer discretionary companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, profitability, risk, dividends, earnings and institutional ownership.

Earnings and Valuation

This table compares Urban Outfitters and Sonic Automotive”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Urban Outfitters	$6.17 billion	1.10	$464.92 million	$5.21	15.14
Sonic Automotive	$15.15 billion	0.18	$118.70 million	$6.27	14.04

Urban Outfitters has higher earnings, but lower revenue than Sonic Automotive. Sonic Automotive is trading at a lower price-to-earnings ratio than Urban Outfitters, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

77.6% of Urban Outfitters shares are held by institutional investors. Comparatively, 46.9% of Sonic Automotive shares are held by institutional investors. 32.1% of Urban Outfitters shares are held by company insiders. Comparatively, 43.7% of Sonic Automotive shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Urban Outfitters and Sonic Automotive’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Urban Outfitters	7.48%	18.92%	10.45%
Sonic Automotive	1.37%	20.75%	3.51%

Volatility & Risk

Urban Outfitters has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500. Comparatively, Sonic Automotive has a beta of 0.86, indicating that its stock price is 14% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Urban Outfitters and Sonic Automotive, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Urban Outfitters	0	5	8	1	2.71
Sonic Automotive	1	5	5	0	2.36

Urban Outfitters currently has a consensus target price of $87.91, suggesting a potential upside of 11.45%. Sonic Automotive has a consensus target price of $97.89, suggesting a potential upside of 11.18%. Given Urban Outfitters’ stronger consensus rating and higher possible upside, equities analysts plainly believe Urban Outfitters is more favorable than Sonic Automotive.

Summary

Urban Outfitters beats Sonic Automotive on 11 of the 15 factors compared between the two stocks.

About Urban Outfitters

Urban Outfitters, Inc. engages in the retail and wholesale of general consumer products. The company operates through three segments: Retail, Wholesale, and Nuuly. It operates Urban Outfitters stores, which offer women's and men's fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics, and beauty products for young adults aged 18 to 28; and Anthropologie stores that provide women's apparel, accessories, intimates, shoes, and home furnishings, as well as gifts, decorative items, and beauty and wellness products for women aged 28 to 45. The company also operates Terrain stores that provide lifestyle home products, garden and outdoor living products, antiques, live plants, flowers, wellness products, and accessories. In addition, it operates Free People retail stores, which offer casual women's apparel, intimates, activewear, shoes, accessories, home products, gifts, and beauty and wellness products for young women aged 25 to 30; and restaurants, as well as women's apparel subscription rental service under the Nuuly brand. Further, the company is involved in the wholesale of young women's contemporary casual apparel, intimates, activewear, and shoes under the Free People brand; and apparel collections under the Urban Outfitters brand. The company serves its customers directly through retail stores, websites, mobile applications, catalogs and customer contact centers, franchisee-owned stores, and department and specialty stores, as well as social media and third-party digital platforms. Urban Outfitters, Inc. was founded in 1970 and is based in Philadelphia, Pennsylvania.

About Sonic Automotive

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates in three segments, Franchised Dealerships, EchoPark, and Powersports. The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products for its guests. The EchoPark segment sells used cars and light trucks; and arranges finance and insurance product sales for its guests in pre-owned vehicle specialty retail locations. The Powersports Segment sells new and used powersports vehicles, such as motorcycles, and personal watercraft and all-terrain vehicles; and offers finance and insurance services. The company was incorporated in 1997 and is based in Charlotte, North Carolina.