Critical Review: RealReal (NASDAQ:REAL) versus Groupon (NASDAQ:GRPN)

RealReal (NASDAQ:REAL) and Groupon (NASDAQ:GRPN) are both small-cap consumer discretionary companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, dividends, risk, earnings, analyst recommendations, valuation and profitability.

Risk and Volatility

RealReal has a beta of 2.69, indicating that its share price is 169% more volatile than the S&P 500. Comparatively, Groupon has a beta of 0.23, indicating that its share price is 77% less volatile than the S&P 500.

Institutional and Insider Ownership

64.7% of RealReal shares are owned by institutional investors. Comparatively, 90.0% of Groupon shares are owned by institutional investors. 2.7% of RealReal shares are owned by company insiders. Comparatively, 36.6% of Groupon shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares RealReal and Groupon”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RealReal	$692.84 million	2.14	-$41.80 million	($1.02)	-12.06
Groupon	$498.42 million	1.91	-$83.52 million	($2.61)	-9.59

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

Profitability

This table compares RealReal and Groupon’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RealReal	-10.82%	N/A	-17.89%
Groupon	-25.26%	N/A	-20.08%

Analyst Ratings

This is a breakdown of recent recommendations for RealReal and Groupon, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RealReal	1	2	6	0	2.56
Groupon	2	1	2	0	2.00

RealReal currently has a consensus target price of $17.75, indicating a potential upside of 44.31%. Groupon has a consensus target price of $19.50, indicating a potential downside of 22.09%. Given RealReal’s stronger consensus rating and higher possible upside, equities analysts clearly believe RealReal is more favorable than Groupon.

Summary

RealReal beats Groupon on 10 of the 13 factors compared between the two stocks.

About RealReal

The RealReal, Inc. operates an online marketplace for resale luxury goods in the United State. The company offers various product categories, including women's fashion, men's fashion, jewelry, and watches. It primarily sells products through online marketplace and retail stores. The company was incorporated in 2011 and is headquartered in San Francisco, California.

About Groupon

Groupon, Inc., together with its subsidiaries, operates a marketplace that connects consumers to merchants. It operates in two segments, North America and International. The company sells goods or services on behalf of third-party merchants. It serves customers through its mobile applications and websites. The company was formerly known as ThePoint.com, Inc. and changed its name to Groupon, Inc. in October 2008. Groupon, Inc. was incorporated in 2008 and is headquartered in Chicago, Illinois.