Analyzing D.R. Horton (NYSE:DHI) & Sleep Number (NASDAQ:SNBR)

Sleep Number (NASDAQ:SNBR) and D.R. Horton (NYSE:DHI) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, analyst recommendations, dividends, institutional ownership and profitability.

Profitability

This table compares Sleep Number and D.R. Horton’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sleep Number	-12.98%	N/A	-16.48%
D.R. Horton	9.15%	12.47%	8.59%

Analyst Ratings

This is a breakdown of current ratings and target prices for Sleep Number and D.R. Horton, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sleep Number	2	2	0	0	1.50
D.R. Horton	0	10	5	0	2.33

Sleep Number presently has a consensus price target of $3.50, suggesting a potential upside of 2,700.00%. D.R. Horton has a consensus price target of $166.92, suggesting a potential upside of 12.51%. Given Sleep Number’s higher possible upside, analysts clearly believe Sleep Number is more favorable than D.R. Horton.

Risk and Volatility

Sleep Number has a beta of 2.49, meaning that its share price is 149% more volatile than the S&P 500. Comparatively, D.R. Horton has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500.

Insider & Institutional Ownership

85.7% of Sleep Number shares are held by institutional investors. Comparatively, 90.6% of D.R. Horton shares are held by institutional investors. 3.6% of Sleep Number shares are held by insiders. Comparatively, 0.7% of D.R. Horton shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Sleep Number and D.R. Horton”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sleep Number	$1.34 billion	0.00	-$131.96 million	($7.56)	-0.02
D.R. Horton	$34.25 billion	1.21	$3.59 billion	$10.51	14.12

D.R. Horton has higher revenue and earnings than Sleep Number. Sleep Number is trading at a lower price-to-earnings ratio than D.R. Horton, indicating that it is currently the more affordable of the two stocks.

Summary

D.R. Horton beats Sleep Number on 11 of the 14 factors compared between the two stocks.

About Sleep Number

Sleep Number Corporation, together with its subsidiaries, offers sleep solutions and services in the United States. The company designs, manufactures, markets, retails, and services beds, pillows, sheets, and other bedding products under the Sleep Number name. It also provides smart adjustable bases under the FlextFit brand, and smart beds under the Climate 360 name. The company sells its products directly to consumers through retail, online, phone, chat, and other. The company was formerly known as Select Comfort Corporation and changed its name to Sleep Number Corporation in November 2017. Sleep Number Corporation was incorporated in 1987 and is headquartered in Minneapolis, Minnesota.

About D.R. Horton

D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. It engages in the acquisition and development of land; and construction and sale of residential homes in 118 markets across 33 states under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, and Freedom Homes. The company constructs and sells single-family detached homes; and attached homes, such as townhomes, duplexes, and triplexes. It also provides mortgage financing services; and title insurance policies, and examination and closing services, as well as engages in the residential lot development business. In addition, the company develops, constructs, owns, leases, and sells multi-family and single-family rental properties; and owns non-residential real estate, including ranch land and improvements. It primarily serves homebuyers. D.R. Horton, Inc. was founded in 1978 and is headquartered in Arlington, Texas.