Comparing ODP (NASDAQ:ODP) & Winmark (NASDAQ:WINA)

ODP (NASDAQ:ODP) and Winmark (NASDAQ:WINA) are both small-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, analyst recommendations, valuation and dividends.

Insider and Institutional Ownership

99.6% of ODP shares are held by institutional investors. Comparatively, 73.3% of Winmark shares are held by institutional investors. 4.6% of ODP shares are held by insiders. Comparatively, 10.1% of Winmark shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

ODP pays an annual dividend of $0.10 per share and has a dividend yield of 0.4%. Winmark pays an annual dividend of $3.84 per share and has a dividend yield of 0.8%. ODP pays out 15.2% of its earnings in the form of a dividend. Winmark pays out 34.2% 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. Winmark has increased its dividend for 5 consecutive years. Winmark is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings for ODP and Winmark, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ODP	0	2	0	0	2.00
Winmark	0	0	0	0	0.00

ODP presently has a consensus price target of $19.00, indicating a potential downside of 31.80%. Given ODP’s stronger consensus rating and higher possible upside, equities research analysts clearly believe ODP is more favorable than Winmark.

Earnings & Valuation

This table compares ODP and Winmark”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ODP	$6.69 billion	0.13	-$3.00 million	$0.66	42.21
Winmark	$83.40 million	21.27	$39.95 million	$11.23	44.50

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

Profitability

This table compares ODP and Winmark’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ODP	0.39%	11.22%	2.58%
Winmark	49.48%	-98.49%	103.78%

Risk & Volatility

ODP has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500. Comparatively, Winmark has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500.

Summary

Winmark beats ODP on 9 of the 16 factors compared between the two stocks.

About ODP

The ODP Corporation provides business services and supplies, products, and digital workplace technology solutions for small, medium, and enterprise businesses in the United States, Puerto Rico, and the U.S. Virgin Islands. The company operates through four divisions: ODP Business Solutions, Office Depot, Veyer, and Varis. The ODP Business Solutions division offers adjacency products, including cleaning, janitorial, and breakroom supplies, office furniture, technology products; and copy and print services through sales force, catalogs, telesales, and through Internet websites. This segment also engages in office supply distribution business. The Office Depot division sells office supplies, technology products and solutions, business machines and related supplies, cleaning, breakroom and facilities products, personal protective equipment, and office furniture; and offers business services, including copying, printing, digital imaging, mailing, shipping, and technology support services through a fully integrated omni-channel platform of 980 Office Depot and OfficeMax retail stores, and through www.officedepot.com. The Veyer division engages in supply chain, distribution, procurement, and global sourcing operations. The Varis division operates tech-enabled B2B indirect procurement marketplace, where buyers and suppliers to transact through the platform's consumer-like buying experience, advanced spend management tools, network of suppliers, and technology capabilities. The company offers its products under various brands, including Office Depot, OfficeMax, and Grand&Toy, as well as others. The ODP Corporation was incorporated in 1986 and is headquartered in Boca Raton, Florida.

About Winmark

Winmark Corporation, a resale company operates as a franchisor for small business in the United States and Canada. The company franchises retail stores concepts that buy, sell and trade merchandise. It also operates middle-market equipment leasing business. In addition, the company buys and sells used clothing and accessories geared toward the teenage and young adult market under Plato’s Closet brand; and operates stores which buys and sells used and new children’s clothing, toys, furniture, equipment, and accessories primarily to parents of children ages infant to 12 years under the Once Upon A Child brand. Further, it buys, sells, trades in, and used and new sporting goods, equipment, and accessories for various athletic activities including team sports, such as baseball/softball, hockey, football, lacrosse, and soccer, as well as fitness, ski/snowboard, golf, and others under the Play It Again Sports brand; and buys and sells used women’s apparel, shoes, and accessories under the Style Encore brand. Additionally, the company buys, sells, trades in, and used and new musical instruments, speakers, amplifiers, music-related electronics, and related accessories under the Music Go Round brand. Winmark Corporation was incorporated in 1988 and is headquartered in Minneapolis, Minnesota.