Reviewing JAKKS Pacific (NASDAQ:JAKK) & Smith & Wesson Brands (NASDAQ:SWBI)

Smith & Wesson Brands (NASDAQ:SWBI) and JAKKS Pacific (NASDAQ:JAKK) are both small-cap consumer discretionary companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Volatility and Risk

Smith & Wesson Brands has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, JAKKS Pacific has a beta of 1.41, meaning that its share price is 41% more volatile than the S&P 500.

Dividends

Smith & Wesson Brands pays an annual dividend of $0.52 per share and has a dividend yield of 3.7%. JAKKS Pacific pays an annual dividend of $1.00 per share and has a dividend yield of 4.0%. Smith & Wesson Brands pays out 130.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. JAKKS Pacific pays out 71.9% of its earnings in the form of a dividend. Smith & Wesson Brands has raised its dividend for 4 consecutive years. JAKKS Pacific is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings and recommmendations for Smith & Wesson Brands and JAKKS Pacific, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Smith & Wesson Brands	0	2	1	0	2.33
JAKKS Pacific	0	2	0	0	2.00

Smith & Wesson Brands presently has a consensus price target of $16.50, indicating a potential upside of 16.44%. Given Smith & Wesson Brands’ stronger consensus rating and higher possible upside, research analysts plainly believe Smith & Wesson Brands is more favorable than JAKKS Pacific.

Profitability

This table compares Smith & Wesson Brands and JAKKS Pacific’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Smith & Wesson Brands	3.53%	5.01%	3.41%
JAKKS Pacific	2.77%	4.33%	2.42%

Earnings & Valuation

This table compares Smith & Wesson Brands and JAKKS Pacific”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Smith & Wesson Brands	$523.84 million	1.21	$18.48 million	$0.40	35.42
JAKKS Pacific	$570.67 million	0.51	$9.87 million	$1.39	18.19

Smith & Wesson Brands has higher earnings, but lower revenue than JAKKS Pacific. JAKKS Pacific is trading at a lower price-to-earnings ratio than Smith & Wesson Brands, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

59.3% of Smith & Wesson Brands shares are held by institutional investors. Comparatively, 44.4% of JAKKS Pacific shares are held by institutional investors. 2.3% of Smith & Wesson Brands shares are held by company insiders. Comparatively, 4.2% of JAKKS Pacific shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Smith & Wesson Brands beats JAKKS Pacific on 11 of the 17 factors compared between the two stocks.

About Smith & Wesson Brands

Smith & Wesson Brands, Inc. is a holding company, which engages in the manufacture, design, and provision of firearms. Its portfolio includes handguns, long guns, handcuffs, suppressor, and other firearm-related products. The firm’s brands are Smith & Wesson, M&P, Thompson/Center Arms, and Gemtech. The company was founded by Horace Smith and Daniel Baird Wesson in 1852 and is headquartered in Maryville, TN.

About JAKKS Pacific

JAKKS Pacific, Inc. designs, produces, markets, sells, and distributes toys and related products, electronic products, and other consumer products worldwide. It operates through two segments, Toys/Consumer Products and Costumes. The company offers action figures and accessories, such as licensed characters; toy vehicles and accessories; dolls and accessories, including small, large, fashion, and baby dolls based on licenses, as well as infant and pre-school products; private label products; and foot-to-floor ride-on products. The company also provides role play, dress-up, pretend play, and novelty products for boys and girls based on brands and entertainment properties, as well as on its own proprietary brands; and indoor and outdoor kids' furniture, activity trays and tables, room décor, and seasonal and outdoor products. In addition, it offers Halloween and everyday costumes for various ages based on licensed and proprietary non-licensed brands, and related Halloween accessories; outdoor activity toys; junior sports toys, including hyper-charged balls, sport sets, and toy hoops; and board games. The company sells its products through in-house sales staff and independent sales representatives to toy and mass-market retail chain stores, department stores, office supply stores, drug and grocery store chains, club stores, value-oriented dollar stores, toy specialty stores, and wholesalers. JAKKS Pacific, Inc. was incorporated in 1995 and is headquartered in Santa Monica, California.