Ethan Allen Interiors (ETH) & Select Comfort Corporation (SCSS) Critical Review

Ethan Allen Interiors (NYSE: ETH) and Select Comfort Corporation (NASDAQ:SCSS) are both small-cap retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitabiliy, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Earnings and Valuation

This table compares Ethan Allen Interiors and Select Comfort Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ethan Allen Interiors $774.15 million 1.12 $84.86 million $1.47 21.22
Select Comfort Corporation $1.36 billion 0.99 $147.51 million $1.35 23.81

Select Comfort Corporation has higher revenue and earnings than Ethan Allen Interiors. Ethan Allen Interiors is trading at a lower price-to-earnings ratio than Select Comfort Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Ethan Allen Interiors and Select Comfort Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ethan Allen Interiors 0 5 1 1 2.43
Select Comfort Corporation 0 5 2 0 2.29

Ethan Allen Interiors presently has a consensus target price of $35.00, suggesting a potential upside of 12.18%. Select Comfort Corporation has a consensus target price of $33.50, suggesting a potential upside of 4.20%. Given Ethan Allen Interiors’ stronger consensus rating and higher possible upside, equities analysts clearly believe Ethan Allen Interiors is more favorable than Select Comfort Corporation.

Volatility and Risk

Ethan Allen Interiors has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500. Comparatively, Select Comfort Corporation has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500.

Dividends

Ethan Allen Interiors pays an annual dividend of $0.76 per share and has a dividend yield of 2.4%. Select Comfort Corporation does not pay a dividend. Ethan Allen Interiors pays out 51.7% of its earnings in the form of a dividend. Ethan Allen Interiors has raised its dividend for 6 consecutive years.

Profitability

This table compares Ethan Allen Interiors and Select Comfort Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ethan Allen Interiors 5.33% 11.31% 7.74%
Select Comfort Corporation 4.46% 44.91% 14.11%

Insider & Institutional Ownership

99.3% of Ethan Allen Interiors shares are owned by institutional investors. Comparatively, 99.8% of Select Comfort Corporation shares are owned by institutional investors. 11.0% of Ethan Allen Interiors shares are owned by company insiders. Comparatively, 4.0% of Select Comfort Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Ethan Allen Interiors beats Select Comfort Corporation on 10 of the 18 factors compared between the two stocks.

About Ethan Allen Interiors

Ethan Allen Interiors Inc. is an interior design company. The Company is a manufacturer and retailer of home furnishings. The Company operates through two segments, which include wholesale and retail. The Company is an international home fashion brand doing business in North America, Europe, Asia and the Middle East. It offers complimentary interior design service to its clients and sells a range of furniture products and decorative accents through ethanallen.com and a network of design centers in the United States and abroad. Its wholesale segment, principally involved in the development of the Ethan Allen brand, encompasses various aspects of design, manufacture, sourcing, sale, and distribution of its range of home furnishings and accents. The Company’s retail segment sells home furnishings and accents to consumers through a network of Company-operated design centers. As of June 30, 2016, the Company owned and operated nine manufacturing facilities.

About Select Comfort Corporation

Select Comfort Corporation is a designer, manufacturer, marketer, retailer and servicer of a line of Sleep Number beds. The Company offers consumers individualized sleep solutions and services, which include a complete line of Sleep Number beds, bases and bedding accessories. Its Sleep Number bed offers SleepIQ technology sensors that work directly with the bed’s DualAir technology to track each individual’s sleep. The Sleep Number bedding collection comprises a line of sleep products that are designed to solve sleep issues. It offers FlextFit adjustable bases, and Sleep Number pillows, sheets and other bedding products. It offers Sleep Number beds in ranges within the mattress category, and in a range of sizes, including twin, full, queen, eastern king and California king. It also offers an assortment of temperature-balancing products. The Company offers Sleep Number beds in series, including Classic Series, Performance Series, Innovation Series and Memory Foam Series.

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