Critical Review: Carvana (NYSE:CVNA) & Sally Beauty (NYSE:SBH)

Sally Beauty (NYSE:SBH) and Carvana (NYSE:CVNA) are both consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, profitability, analyst recommendations, earnings and institutional ownership.

Valuation & Earnings

This table compares Sally Beauty and Carvana”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sally Beauty	$3.73 billion	0.40	$195.88 million	$1.92	8.23
Carvana	$25.06 billion	2.86	$1.41 billion	$1.81	35.98

Carvana has higher revenue and earnings than Sally Beauty. Sally Beauty is trading at a lower price-to-earnings ratio than Carvana, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Sally Beauty and Carvana, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sally Beauty	1	3	3	0	2.29
Carvana	0	7	16	1	2.75

Sally Beauty currently has a consensus price target of $17.40, indicating a potential upside of 10.16%. Carvana has a consensus price target of $84.14, indicating a potential upside of 29.18%. Given Carvana’s stronger consensus rating and higher possible upside, analysts plainly believe Carvana is more favorable than Sally Beauty.

Profitability

This table compares Sally Beauty and Carvana’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sally Beauty	5.16%	24.36%	7.07%
Carvana	6.26%	37.06%	12.21%

Volatility & Risk

Sally Beauty has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500. Comparatively, Carvana has a beta of 3.49, suggesting that its stock price is 249% more volatile than the S&P 500.

Institutional & Insider Ownership

56.7% of Carvana shares are held by institutional investors. 2.0% of Sally Beauty shares are held by company insiders. Comparatively, 15.2% of Carvana 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

Carvana beats Sally Beauty on 14 of the 15 factors compared between the two stocks.

About Sally Beauty

Sally Beauty Holdings, Inc. operates as a specialty retailer and distributor of professional beauty supplies. The company operates through two segments, Sally Beauty Supply and Beauty Systems Group. The Sally Beauty Supply segment offers beauty products, including hair color and care products, skin and nail care products, styling tools, and other beauty products for retail customers, salons, and salon professionals. This segment also provides products under Wella and L'Oreal brands. The Beauty Systems Group segment offers professional beauty products, such as hair color and care products, skin and nail care products, styling tools, and other beauty items directly to salons and salon professionals through its professional-only stores, e-commerce platforms, and sales force, as well as through franchised stores under the Armstrong McCall store name. This segment also sells products under Paul Mitchell and Wella brands. It operates stores and franchised units in the United States, Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom, Ireland, Belgium, France, the Netherlands, Spain, and Germany. The company distributes its products through full-service/exclusive distributors and open-line distributors. Sally Beauty Holdings, Inc. was founded in 1964 and is headquartered in Denton, Texas.

About Carvana

Carvana Co., together with its subsidiaries, operates an e-commerce platform for buying and selling used cars in the United States. Its platform allows customers to research and identify a vehicle; inspect it using company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices. The company also operates auction sites. The company was founded in 2012 and is based in Tempe, Arizona.