Wal-Mart Stores (NYSE:WMT) & SpartanNash (SPTN) Critical Review

Wal-Mart Stores (NYSE: WMT) and SpartanNash (NASDAQ:SPTN) are both retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, dividends, analyst recommendations, profitability, valuation and risk.

Analyst Ratings

This is a summary of recent recommendations and price targets for Wal-Mart Stores and SpartanNash, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Wal-Mart Stores 2 17 14 0 2.36
SpartanNash 1 3 1 0 2.00

Wal-Mart Stores presently has a consensus price target of $80.47, suggesting a potential upside of 1.46%. SpartanNash has a consensus price target of $25.25, suggesting a potential upside of 4.17%. Given SpartanNash’s higher possible upside, analysts clearly believe SpartanNash is more favorable than Wal-Mart Stores.

Institutional and Insider Ownership

30.0% of Wal-Mart Stores shares are held by institutional investors. Comparatively, 87.9% of SpartanNash shares are held by institutional investors. 51.4% of Wal-Mart Stores shares are held by company insiders. Comparatively, 3.0% of SpartanNash shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Wal-Mart Stores and SpartanNash’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Wal-Mart Stores $487.51 billion 0.49 $32.97 billion $4.16 19.06
SpartanNash $7.86 billion 0.12 $225.80 million $1.74 13.93

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

Risk and Volatility

Wal-Mart Stores has a beta of 0.29, meaning that its share price is 71% less volatile than the S&P 500. Comparatively, SpartanNash has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Dividends

Wal-Mart Stores pays an annual dividend of $2.04 per share and has a dividend yield of 2.6%. SpartanNash pays an annual dividend of $0.66 per share and has a dividend yield of 2.7%. Wal-Mart Stores pays out 49.0% of its earnings in the form of a dividend. SpartanNash pays out 37.9% 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. Wal-Mart Stores has increased its dividend for 42 consecutive years. SpartanNash is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Wal-Mart Stores and SpartanNash’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Wal-Mart Stores 2.60% 16.87% 6.61%
SpartanNash 0.83% 10.00% 4.01%

Summary

Wal-Mart Stores beats SpartanNash on 12 of the 17 factors compared between the two stocks.

About Wal-Mart Stores

Wal-Mart Stores, Inc. is engaged in the operation of retail, wholesale and other units in various formats around the world. The Company operates through three segments: Walmart U.S., Walmart International and Sam’s Club. The Walmart U.S. segment includes its mass merchant concept in the United States operating under the Walmart or Wal-Mart brands, as well as digital retail. The Walmart International segment consists of the Company’s operations outside of the United States, including various retail Websites. The Walmart International segment includes various formats divided into three categories: retail, wholesale and other. These categories consist of various formats, including supercenters, supermarkets, and warehouse clubs, such as Sam’s Clubs, cash and carry, home improvement, specialty electronics, apparel stores, drug stores and convenience stores, as well as digital retail. The Sam’s Club segment includes the warehouse membership clubs in the United States, and samsclub.com.

About SpartanNash

SpartanNash Company is a multi-regional grocery distributor and grocery retailer. The Company’s core businesses include distributing grocery products to independent grocery retailers (independent retailers), select national retailers, its corporate owned retail stores, and the United States military commissaries. The Company operates through three segments: Food Distribution, Military and Retail. The Food Distribution segment provides a range of nationally branded and private brand grocery products and perishable food products to independent retailers, food service distributors and its corporate owned retail stores. The Military segment contracts with manufacturers to distribute a range of grocery products primarily to military commissaries and exchanges located in the United States, the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. As of December 31, 2016, the Retail segment operated 157 corporate owned retail stores in the Midwest and Great Lakes regions.

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