Critical Contrast: CarMax (NYSE:KMX) versus Revolve Group (NYSE:RVLV)

Revolve Group (NYSE:RVLV) and CarMax (NYSE:KMX) are both consumer discretionary companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, dividends, profitability, analyst recommendations, valuation, earnings and risk.

Earnings & Valuation

This table compares Revolve Group and CarMax”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Revolve Group	$1.23 billion	1.30	$61.71 million	$1.01	22.17
CarMax	$25.88 billion	0.31	$247.29 million	$2.05	27.13

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

Institutional and Insider Ownership

67.6% of Revolve Group shares are owned by institutional investors. 42.7% of Revolve Group shares are owned by company insiders. Comparatively, 1.0% of CarMax shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

Revolve Group has a beta of 1.7, indicating that its stock price is 70% more volatile than the S&P 500. Comparatively, CarMax has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500.

Profitability

This table compares Revolve Group and CarMax’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Revolve Group	5.54%	13.38%	8.71%
CarMax	1.06%	7.76%	1.81%

Analyst Recommendations

This is a breakdown of current recommendations for Revolve Group and CarMax, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Revolve Group	0	6	7	1	2.64
CarMax	2	13	3	1	2.16

Revolve Group presently has a consensus target price of $29.69, indicating a potential upside of 32.61%. CarMax has a consensus target price of $57.85, indicating a potential upside of 4.00%. Given Revolve Group’s stronger consensus rating and higher probable upside, research analysts plainly believe Revolve Group is more favorable than CarMax.

Summary

Revolve Group beats CarMax on 10 of the 14 factors compared between the two stocks.

About Revolve Group

Revolve Group, Inc. operates as an online fashion retailer for millennial and generation z consumers in the United States and internationally. The company operates in two segments, REVOLVE and FWRD. It operates a platform that connects consumers and global fashion influencers, as well as emerging, established, and owned brands. The company offers apparel, footwear, accessories, beauty, and home products from emerging, established, and owned brands, as well as luxury brands through its websites and mobile apps. The company was formerly known as Advance Holdings, LLC and changed its name to Revolve Group, Inc. in October 2018. Revolve Group, Inc. was founded in 2003 and is headquartered in Cerritos, California.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. The company was founded in 1993 and is based in Richmond, Virginia.