Winmark (NASDAQ:WINA) and Sally Beauty (NYSE:SBH) Critical Analysis

Sally Beauty (NYSE:SBH) and Winmark (NASDAQ:WINA) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, valuation, risk, dividends, institutional ownership, profitability and analyst recommendations.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Sally Beauty	5.36%	24.07%	7.17%
Winmark	45.13%	-94.74%	111.43%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Sally Beauty and Winmark, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sally Beauty	1	2	3	0	2.33
Winmark	0	1	0	0	2.00

Sally Beauty currently has a consensus target price of $21.17, suggesting a potential upside of 11.63%. Given Sally Beauty’s stronger consensus rating and higher probable upside, equities analysts clearly believe Sally Beauty is more favorable than Winmark.

Risk and Volatility

Sally Beauty has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500. Comparatively, Winmark has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.

Institutional and Insider Ownership

73.3% of Winmark shares are held by institutional investors. 2.0% of Sally Beauty shares are held by insiders. Comparatively, 10.4% of Winmark shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sally Beauty	$3.73 billion	0.46	$195.88 million	$2.03	9.34
Winmark	$86.06 million	11.24	$41.65 million	$11.21	24.23

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

About Sally Beauty

Sally Beauty Holdings, Inc. is a specialty retailer and distributor of professional beauty products. It serves both individual consumers and salon professionals through retail stores, online channels and professional distribution. The company operates Sally Beauty, which sells products such as hair color and care items, styling tools, nail products and skincare. Its CosmoProf business supplies salons and other beauty professionals with products, equipment and related educational resources. Sally Beauty traces its roots to a beauty supply store opened in New Orleans in 1964.

About Winmark

Winmark Corporation is a franchisor focused on resale retail. Its franchise brands include Plato’s Closet, Once Upon A Child, Play It Again Sports, Style Encore and Music Go Round. The stores buy and sell secondhand clothing, children’s goods, sporting equipment, musical instruments and related merchandise. Founded in 1988 as Grow Biz International, the company adopted the Winmark name in 2001. Its franchise network serves communities in the United States and Canada, with Winmark providing franchisees with brand systems and business support.