Critical Contrast: Driven Brands (NASDAQ:DRVN) and Sally Beauty (NYSE:SBH)

Sally Beauty (NYSE:SBH) and Driven Brands (NASDAQ:DRVN) are both small-cap consumer discretionary companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, earnings, profitability, analyst recommendations, institutional ownership, valuation and dividends.

Analyst Ratings

This is a summary of recent ratings and price targets for Sally Beauty and Driven Brands, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sally Beauty	1	3	3	0	2.29
Driven Brands	2	7	6	2	2.47

Sally Beauty presently has a consensus target price of $17.40, suggesting a potential upside of 5.33%. Driven Brands has a consensus target price of $16.23, suggesting a potential upside of 39.61%. Given Driven Brands’ stronger consensus rating and higher possible upside, analysts clearly believe Driven Brands is more favorable than Sally Beauty.

Valuation & Earnings

This table compares Sally Beauty and Driven Brands”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sally Beauty	$3.70 billion	0.42	$195.88 million	$1.92	8.60
Driven Brands	$1.86 billion	1.03	$140.16 million	$1.04	11.18

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

Profitability

This table compares Sally Beauty and Driven Brands’ 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%
Driven Brands	8.61%	24.13%	5.03%

Institutional and Insider Ownership

77.1% of Driven Brands shares are owned by institutional investors. 2.0% of Sally Beauty shares are owned by company insiders. Comparatively, 4.4% of Driven Brands shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Sally Beauty has a beta of 1.05, meaning that its stock price is 5% more volatile than the S&P 500. Comparatively, Driven Brands has a beta of 0.94, meaning that its stock price is 6% less volatile than the S&P 500.

Summary

Driven Brands beats Sally Beauty on 9 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 Driven Brands

Driven Brands Holdings Inc., together with its subsidiaries, provides automotive services to retail and commercial customers in the United States, Canada, and internationally. It offers various services, such as paint, collision, glass, repair, car wash, oil change, and maintenance services. The company also distributes automotive parts, including radiators, air conditioning components, and exhaust products to automotive repair shops, auto parts stores, body shops, and other auto repair outlets; windshields and glass accessories through a network of distribution centers; and consumable products, such as oil filters and wiper blades, as well as training services to repair and maintenance, and paint and collision shops. It sells its products and services under the CARSTAR, IMO, MAACO, Meineke Car Care Centers, PH Vitres D’Autos, Take 5 Oil Change, Take 5 Car Wash, Auto Glass Now, Fix Auto USA, and 1-800-Radiator & A/C, Spire Supply, and Automotive Training Institute brands. The company was founded in 1972 and is headquartered in Charlotte, North Carolina.