Sonic Automotive (NYSE: SAH) and AutoZone (NYSE:AZO) are both retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, risk, dividends, profitabiliy, earnings, valuation and institutional ownership.

Analyst Recommendations

This is a summary of recent ratings for Sonic Automotive and AutoZone, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic Automotive 0 3 1 0 2.25
AutoZone 1 12 10 0 2.39

Sonic Automotive currently has a consensus target price of $23.67, suggesting a potential upside of 20.44%. AutoZone has a consensus target price of $763.05, suggesting a potential upside of 51.83%. Given AutoZone’s stronger consensus rating and higher probable upside, analysts plainly believe AutoZone is more favorable than Sonic Automotive.

Volatility and Risk

Sonic Automotive has a beta of 1.54, indicating that its share price is 54% more volatile than the S&P 500. Comparatively, AutoZone has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Sonic Automotive 0.80% 12.03% 2.38%
AutoZone 11.82% -70.52% 14.44%

Insider and Institutional Ownership

63.8% of Sonic Automotive shares are held by institutional investors. Comparatively, 96.8% of AutoZone shares are held by institutional investors. 30.3% of Sonic Automotive shares are held by company insiders. Comparatively, 2.6% of AutoZone shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Sonic Automotive pays an annual dividend of $0.20 per share and has a dividend yield of 1.0%. AutoZone does not pay a dividend. Sonic Automotive pays out 11.6% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Sonic Automotive and AutoZone’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sonic Automotive $9.78 billion 0.09 $299.99 million $1.72 11.42
AutoZone $10.77 billion 1.31 $2.39 billion $43.18 11.64

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

Summary

AutoZone beats Sonic Automotive on 12 of the 16 factors compared between the two stocks.

About Sonic Automotive

Sonic Automotive, Inc. is an automotive retailer in the United States. The Company’s operating segments include Franchised Dealerships and EchoPark. Its Franchised Dealerships segment consists of retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products. The EchoPark segment consists of standalone specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles. Its franchised dealerships provide services, including sales of both new and used cars, and light trucks; sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, Fixed Operations), and arrangement of extended warranties, service contracts, financing, insurance and other aftermarket products (collectively, F&I) for its customers.

About AutoZone

Autozone, Inc. is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates through the Auto Parts Locations segment. The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories. As of August 27, 2016, the Company operated through 5,814 locations in the United States, Puerto Rico, Mexico and Brazil. The Company’s stores carry product lines for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. The Company’s other operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry; E-commerce, which includes direct sales to customers through www.autozone.com, and AutoAnything, which includes direct sales to customers through www.autoanything.com.

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