Best Buy (NYSE:BBY) and Starbucks (NASDAQ:SBUX) are both large-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, earnings, institutional ownership, valuation, dividends and risk.
Dividends
Best Buy pays an annual dividend of $2.20 per share and has a dividend yield of 2.6%. Starbucks pays an annual dividend of $1.64 per share and has a dividend yield of 2.3%. Best Buy pays out 36.2% of its earnings in the form of a dividend. Starbucks pays out 58.0% 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 raised its dividend for 8 consecutive years and Starbucks has raised its dividend for 9 consecutive years. Best Buy is clearly the better dividend stock, given its higher yield and lower payout ratio.
Volatility & Risk
Best Buy has a beta of 1.48, indicating that its stock price is 48% more volatile than the S&P 500. Comparatively, Starbucks has a beta of 0.79, indicating that its stock price is 21% less volatile than the S&P 500.
Profitability
This table compares Best Buy and Starbucks' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Best Buy | 3.33% | 45.89% | 9.67% |
| Starbucks | 12.71% | -50.19% | 13.08% |
Analyst Recommendations
This is a summary of current recommendations for Best Buy and Starbucks, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Best Buy | 0 | 7 | 12 | 0 | 2.63 |
| Starbucks | 0 | 17 | 13 | 0 | 2.43 |
Best Buy presently has a consensus price target of $88.1579, indicating a potential upside of 2.99%. Starbucks has a consensus price target of $82.4167, indicating a potential upside of 13.44%. Given Starbucks' higher possible upside, analysts clearly believe Starbucks is more favorable than Best Buy.
Insider & Institutional Ownership
77.4% of Best Buy shares are held by institutional investors. Comparatively, 68.5% of Starbucks shares are held by institutional investors. 0.6% of Best Buy shares are held by insiders. Comparatively, 0.4% of Starbucks shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Earnings and Valuation
This table compares Best Buy and Starbucks' top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Best Buy | $43.64 billion | 0.51 | $1.54 billion | $6.07 | 14.10 |
| Starbucks | $26.51 billion | 3.20 | $3.60 billion | $2.83 | 25.67 |
Starbucks has lower revenue, but higher earnings than Best Buy. Best Buy is trading at a lower price-to-earnings ratio than Starbucks, indicating that it is currently the more affordable of the two stocks.
Summary
Best Buy beats Starbucks on 9 of the 17 factors compared between the two stocks.
