Critical Survey: Sonic Automotive (NYSE:SAH) versus Genesco (NYSE:GCO)

Genesco (NYSE:GCO) and Sonic Automotive (NYSE:SAH) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Profitability

This table compares Genesco and Sonic Automotive’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Genesco	1.71%	3.14%	1.19%
Sonic Automotive	1.37%	20.75%	3.51%

Analyst Ratings

This is a breakdown of recent recommendations for Genesco and Sonic Automotive, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Genesco	0	3	0	2	2.80
Sonic Automotive	2	4	4	0	2.20

Genesco currently has a consensus price target of $36.00, suggesting a potential upside of 3.54%. Sonic Automotive has a consensus price target of $97.00, suggesting a potential upside of 54.25%. Given Sonic Automotive’s higher possible upside, analysts plainly believe Sonic Automotive is more favorable than Genesco.

Institutional and Insider Ownership

94.5% of Genesco shares are held by institutional investors. Comparatively, 46.9% of Sonic Automotive shares are held by institutional investors. 23.1% of Genesco shares are held by company insiders. Comparatively, 43.7% of Sonic Automotive shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Genesco and Sonic Automotive”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Genesco	$2.44 billion	0.15	$13.27 million	$3.84	9.05
Sonic Automotive	$15.15 billion	0.13	$118.70 million	$6.27	10.03

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

Risk and Volatility

Genesco has a beta of 1.81, indicating that its stock price is 81% more volatile than the S&P 500. Comparatively, Sonic Automotive has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500.

Summary

Sonic Automotive beats Genesco on 9 of the 15 factors compared between the two stocks.

About Genesco

Genesco Inc. operates as a retailer and wholesaler of footwear, apparel, and accessories in the United States, Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland. The company operates through four segments: Journeys Group, Schuh Group, Johnston & Murphy Group, and Genesco Brands. The Journeys Group segment offers footwear and accessories through the Journeys, Journeys Kidz, and Little Burgundy retail chains, as well as through e-commerce and catalogs for young men, women, and children. Its Schuh Group segment operates Schuh retail footwear stores that offer casual and athletic footwear, as well as sells footwear through e-commerce. The Johnston & Murphy Group segment involved in the retail and e-commerce operations; and wholesale distribution of men’s dress and casual footwear, apparel, and accessories, as well as women’s footwear and accessories. Its Genesco Brands Group segment markets footwear under the Levi’s, Dockers, and G.H. Bass brands for men, women, and children, as well as designs and manufactures the STARTER brands footwear. The company operates through Journeys, Journeys Kidz, Schuh, Little Burgundy, and Johnston & Murphy brand names; and e-commerce websites, including journeys.com, journeyskidz.com, journeys.ca, schuh.co.uk, schuh.ie, schuh.eu, johnstonmurphy.com, littleburgundyshoes.com, johnstonmurphy.ca, nashvilleshoewarehouse.com, and dockersshoes.com. Genesco Inc. was incorporated in 1934 and is headquartered in Nashville, Tennessee.

About Sonic Automotive

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates in three segments, Franchised Dealerships, EchoPark, and Powersports. The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products for its guests. The EchoPark segment sells used cars and light trucks; and arranges finance and insurance product sales for its guests in pre-owned vehicle specialty retail locations. The Powersports Segment sells new and used powersports vehicles, such as motorcycles, and personal watercraft and all-terrain vehicles; and offers finance and insurance services. The company was incorporated in 1997 and is based in Charlotte, North Carolina.