Critical Review: Systemax (NYSE:SYX) versus Aaron’s, (AAN)

Systemax (NYSE: SYX) and Aaron’s, (NYSE:AAN) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, risk, earnings, profitability, valuation and dividends.

Volatility and Risk

Systemax has a beta of 0.23, meaning that its share price is 77% less volatile than the S&P 500. Comparatively, Aaron’s, has a beta of 0.17, meaning that its share price is 83% less volatile than the S&P 500.

Dividends

Systemax pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Aaron’s, pays an annual dividend of $0.11 per share and has a dividend yield of 0.2%. Systemax pays out -114.3% of its earnings in the form of a dividend. Aaron’s, pays out 5.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Aaron’s, has increased its dividend for 10 consecutive years. Systemax is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Systemax and Aaron’s, ‘s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Systemax -0.87% 12.27% 5.14%
Aaron’s, 4.36% 12.00% 6.94%

Valuation & Earnings

This table compares Systemax and Aaron’s, ‘s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Systemax $1.71 billion 0.50 $42.30 million ($0.35) -65.91
Aaron’s, $3.22 billion 0.99 $477.02 million $1.95 23.17

Aaron’s, has higher revenue and earnings than Systemax. Systemax is trading at a lower price-to-earnings ratio than Aaron’s, , indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Systemax and Aaron’s, , as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Systemax 0 0 1 0 3.00
Aaron’s, 0 3 5 0 2.63

Systemax presently has a consensus price target of $31.00, suggesting a potential upside of 34.37%. Aaron’s, has a consensus price target of $42.58, suggesting a potential downside of 5.77%. Given Systemax’s stronger consensus rating and higher probable upside, equities analysts clearly believe Systemax is more favorable than Aaron’s, .

Insider & Institutional Ownership

24.7% of Systemax shares are owned by institutional investors. Comparatively, 99.2% of Aaron’s, shares are owned by institutional investors. 69.6% of Systemax shares are owned by insiders. Comparatively, 1.9% of Aaron’s, shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Aaron’s, beats Systemax on 9 of the 16 factors compared between the two stocks.

Systemax Company Profile

Systemax Inc. is a direct marketer of brand name and private label products. The Company’s segments are Industrial Products Group (IPG), EMEA Technology Products Group (EMEA), and Corporate and Other (Corporate). The IPG segment sells an array of maintenance, repair and operational (MRO) products, which are marketed in North America. The Company offers a selection of products that are manufactured for its own design and marketed under the trademarks: Global, GlobalIndustrial.com, Nexel Relius, Paramount and Interion. EMEA sells products categorized as Information and Communications Technology (ICT) and Consumer Electronics (CE), as well as related technical services, such as configuration, implementation, network security, and other technical services. CE products include television and video; audio; cameras and surveillance; Global Positioning System (GPS); cell phones; video games, and home and electronics accessories.

Aaron’s, Company Profile

Aaron’s, Inc. (Aaron’s) is an omnichannel provider of lease-purchase solutions. The Company engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its Company-operated and franchised stores in Canada, as well as its e-commerce platform, Aarons.com. Its segments include Sales and Lease Ownership, Progressive Finance Holdings, LLC (Progressive), Dent-A-Med, Inc., doing business as the HELPcard (DAMI), Franchise and Manufacturing. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, Ashley and Magnavox. As of December 31, 2016, it had 1,864 Aaron’s stores, consisted of 1,165 Company-operated stores in 28 states, the District of Columbia and Canada, and 699 independently-owned franchised stores in 46 states and Canada. It owns trademarks and trade names used in business, including Progressive, Dent-A-Med, the HELPcard and Woodhaven Furniture Industries.

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