Contrasting Best Buy (NYSE:BBY) & Ross Stores (NASDAQ:ROST)

Best Buy (NYSE:BBY) and Ross Stores (NASDAQ:ROST) are both large-cap consumer discretionary companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, risk, dividends and earnings.

Institutional & Insider Ownership

81.0% of Best Buy shares are held by institutional investors. Comparatively, 86.9% of Ross Stores shares are held by institutional investors. 0.5% of Best Buy shares are held by insiders. Comparatively, 2.1% of Ross Stores shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Best Buy	3.01%	48.14%	9.16%
Ross Stores	10.85%	39.29%	15.79%

Dividends

Best Buy pays an annual dividend of $3.84 per share and has a dividend yield of 4.3%. Ross Stores pays an annual dividend of $1.78 per share and has a dividend yield of 0.8%. Best Buy pays out 63.9% of its earnings in the form of a dividend. Ross Stores pays out 21.5% 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. Best Buy has increased its dividend for 22 consecutive years and Ross Stores has increased its dividend for 6 consecutive years. Best Buy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Best Buy and Ross Stores”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Best Buy	$41.69 billion	0.46	$1.07 billion	$6.01	15.03
Ross Stores	$24.51 billion	3.01	$2.15 billion	$8.26	27.93

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

Risk & Volatility

Best Buy has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Ross Stores has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Best Buy	2	13	7	0	2.23
Ross Stores	0	6	15	0	2.71

Best Buy presently has a consensus target price of $85.40, indicating a potential downside of 5.48%. Ross Stores has a consensus target price of $263.76, indicating a potential upside of 14.34%. Given Ross Stores’ stronger consensus rating and higher probable upside, analysts clearly believe Ross Stores is more favorable than Best Buy.

Summary

Ross Stores beats Best Buy on 12 of the 17 factors compared between the two stocks.

About Best Buy

Best Buy Co., Inc. engages in the retail of technology products in the United States, Canada, and international. Its stores provide computing and mobile phone products, such as desktops, notebooks, and peripherals; mobile phones comprising related mobile network carrier commissions; networking products; tablets covering e-readers; smartwatches; and consumer electronics consisting of digital imaging, health and fitness products, portable audio comprising headphones and portable speakers, and smart home products, as well as home theaters, which includes home theater accessories, soundbars, and televisions. The company's stores also offer appliances, such as dishwashers, laundry, ovens, refrigerators, blenders, coffee makers, vacuums, and personal care; entertainment products consisting of drones, peripherals, movies, and toys, as well as hardware and software, and virtual reality and other software products; and other products, such as baby, food and beverage, luggage, outdoor living, and sporting goods. In addition, it provides delivery, installation, memberships, repair, set-up, technical support, health-related, and warranty-related services. The company offers its products through stores and websites under the Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, Buy Mobile, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen, Home, TechLiquidators, and Yardbird brands, as well as domain names comprising bestbuy.com, currenthealth.com, lively.com, techliquidators.com, yardbird.com, and bestbuy.ca. The company was formerly known as Sound of Music, Inc. Best Buy Co., Inc. was incorporated in 1966 and is headquartered in Richfield, Minnesota.

About Ross Stores

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Its stores primarily offer apparel, accessories, footwear, and home fashions. The company’s Ross Dress for Less stores sell its products at department and specialty stores to middle income households; and dd’s DISCOUNTS stores sell its products at department and discount stores for households with moderate income. Ross Stores, Inc. was incorporated in 1957 and is headquartered in Dublin, California.