Analyzing Urban Outfitters (NASDAQ:URBN) & Sonic Automotive (NYSE:SAH)

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

Analyst Recommendations

This is a breakdown of recent ratings for Sonic Automotive and Urban Outfitters, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sonic Automotive	2	3	6	0	2.36
Urban Outfitters	0	5	8	1	2.71

Sonic Automotive presently has a consensus target price of $97.89, indicating a potential upside of 18.90%. Urban Outfitters has a consensus target price of $87.91, indicating a potential upside of 14.29%. Given Sonic Automotive’s higher possible upside, analysts clearly believe Sonic Automotive is more favorable than Urban Outfitters.

Valuation and Earnings

This table compares Sonic Automotive and Urban Outfitters”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sonic Automotive	$15.15 billion	0.17	$118.70 million	$6.27	13.13
Urban Outfitters	$6.17 billion	1.07	$464.92 million	$5.21	14.76

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

Volatility and Risk

Sonic Automotive has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500. Comparatively, Urban Outfitters has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500.

Insider & Institutional Ownership

46.9% of Sonic Automotive shares are owned by institutional investors. Comparatively, 77.6% of Urban Outfitters shares are owned by institutional investors. 43.7% of Sonic Automotive shares are owned by company insiders. Comparatively, 32.1% of Urban Outfitters shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Sonic Automotive and Urban Outfitters’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sonic Automotive	1.37%	20.75%	3.51%
Urban Outfitters	7.48%	18.92%	10.45%

Summary

Urban Outfitters beats Sonic Automotive on 10 of the 15 factors compared between the two stocks.

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.

About Urban Outfitters

Urban Outfitters, Inc. engages in the retail and wholesale of general consumer products. The company operates through three segments: Retail, Wholesale, and Nuuly. It operates Urban Outfitters stores, which offer women's and men's fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics, and beauty products for young adults aged 18 to 28; and Anthropologie stores that provide women's apparel, accessories, intimates, shoes, and home furnishings, as well as gifts, decorative items, and beauty and wellness products for women aged 28 to 45. The company also operates Terrain stores that provide lifestyle home products, garden and outdoor living products, antiques, live plants, flowers, wellness products, and accessories. In addition, it operates Free People retail stores, which offer casual women's apparel, intimates, activewear, shoes, accessories, home products, gifts, and beauty and wellness products for young women aged 25 to 30; and restaurants, as well as women's apparel subscription rental service under the Nuuly brand. Further, the company is involved in the wholesale of young women's contemporary casual apparel, intimates, activewear, and shoes under the Free People brand; and apparel collections under the Urban Outfitters brand. The company serves its customers directly through retail stores, websites, mobile applications, catalogs and customer contact centers, franchisee-owned stores, and department and specialty stores, as well as social media and third-party digital platforms. Urban Outfitters, Inc. was founded in 1970 and is based in Philadelphia, Pennsylvania.