Macy’s (NYSE:M) vs. Dollarama (OTCMKTS:DLMAF) Critical Review

Dollarama (OTCMKTS:DLMAF) and Macy’s (NYSE:M) are both consumer discretionary companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, profitability, dividends, earnings and analyst recommendations.

Institutional & Insider Ownership

87.4% of Macy’s shares are owned by institutional investors. 1.1% of Macy’s shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Dollarama and Macy’s, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dollarama	0	4	5	5	3.07
Macy’s	2	8	2	1	2.15

Macy’s has a consensus price target of $22.78, suggesting a potential upside of 3.40%. Given Macy’s’ higher probable upside, analysts clearly believe Macy’s is more favorable than Dollarama.

Dividends

Dollarama pays an annual dividend of $0.34 per share and has a dividend yield of 0.3%. Macy’s pays an annual dividend of $0.77 per share and has a dividend yield of 3.5%. Dollarama pays out 12.9% of its earnings in the form of a dividend. Macy’s pays out 31.8% 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. Macy’s has raised its dividend for 4 consecutive years. Macy’s is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Dollarama and Macy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Dollarama	17.65%	94.77%	17.12%
Macy’s	3.29%	13.21%	3.83%

Valuation and Earnings

This table compares Dollarama and Macy’s”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dollarama	$5.21 billion	6.22	$940.70 million	$2.64	45.65
Macy’s	$22.62 billion	0.26	$642.00 million	$2.42	9.10

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

Summary

Dollarama beats Macy’s on 11 of the 17 factors compared between the two stocks.

About Dollarama

Dollarama Inc. operates a chain of dollar stores in Canada. Its stores offer general merchandise, consumables, and seasonal products. It also sells its products through online store. The company was formerly known as Dollarama Capital Corporation and changed its name to Dollarama Inc. in September 2009. Dollarama Inc. was founded in 1992 and is headquartered in Mount Royal, Canada.

About Macy’s

Macy’s, Inc. engages in the retail of apparel, accessories, cosmetics, home furnishings, and other consumer goods. The firm’s brands include Macy’s, Bloomingdale’s, and Bluemercury. It offers men’s, women’s, and children’s apparel, women’s accessories, intimate apparel, shoes, cosmetics, fragrances, as well as home and miscellaneous products. The company was founded by Rowland H. Macy in 1858 and is headquartered in New York, NY.