Head to Head Contrast: Best Buy Co. (BBY) and Gamestop Corporation (GME)

Best Buy Co. (NYSE: BBY) and Gamestop Corporation (NYSE:GME) are both mid-cap retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, profitabiliy, risk, valuation, earnings and analyst recommendations.

Dividends

Best Buy Co. pays an annual dividend of $1.36 per share and has a dividend yield of 2.4%. Gamestop Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 7.4%. Best Buy Co. pays out 36.5% of its earnings in the form of a dividend. Gamestop Corporation pays out 45.0% 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. Best Buy Co. has raised its dividend for 5 consecutive years and Gamestop Corporation has raised its dividend for 5 consecutive years.

Profitability

This table compares Best Buy Co. and Gamestop Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Best Buy Co. 3.01% 26.81% 8.73%
Gamestop Corporation 3.99% 17.55% 8.12%

Analyst Recommendations

This is a summary of recent ratings for Best Buy Co. and Gamestop Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Best Buy Co. 3 2 17 0 2.64
Gamestop Corporation 1 7 7 0 2.40

Best Buy Co. currently has a consensus price target of $55.19, indicating a potential downside of 0.83%. Gamestop Corporation has a consensus price target of $25.50, indicating a potential upside of 23.83%. Given Gamestop Corporation’s higher possible upside, analysts clearly believe Gamestop Corporation is more favorable than Best Buy Co..

Institutional and Insider Ownership

93.9% of Best Buy Co. shares are held by institutional investors. Comparatively, 99.6% of Gamestop Corporation shares are held by institutional investors. 1.2% of Best Buy Co. shares are held by company insiders. Comparatively, 2.8% of Gamestop Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Best Buy Co. and Gamestop Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Best Buy Co. $39.49 billion 0.43 $2.31 billion $3.73 14.92
Gamestop Corporation $8.68 billion 0.24 $762.40 million $3.38 6.09

Best Buy Co. has higher revenue and earnings than Gamestop Corporation. Gamestop Corporation is trading at a lower price-to-earnings ratio than Best Buy Co., indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Best Buy Co. has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500. Comparatively, Gamestop Corporation has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500.

Summary

Best Buy Co. beats Gamestop Corporation on 11 of the 16 factors compared between the two stocks.

About Best Buy Co.

Best Buy Co., Inc. is a provider of technology products, services and solutions. The Company offers products and services to the customers visiting its stores, engaging with Geek Squad agents, or using its Websites or mobile applications. It has operations in the United States, Canada and Mexico. The Company operates through two segments: Domestic and International. The Domestic segment consists of the operations in all states, districts and territories of the United States, under various brand names, including Best Buy, bestbuy.com, Best Buy Mobile, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, and Pacific Kitchen and Home. The International segment consists of all operations in Canada and Mexico under the brand names, Best Buy, bestbuy.com.ca, bestbuy.com.mx, Best Buy Express, Best Buy Mobile and Geek Squad. As of December 31, 2016, the Company operated 1,200 large-format and 400 small-format stores throughout its Domestic and International segments.

About Gamestop Corporation

GameStop Corp. is an omnichannel video game retailer. The Company sells video game hardware, physical and digital video game software, video game accessories, as well as mobile and consumer electronics products and other merchandise through its GameStop, EB Games and Micromania stores. It operates its business in five segments, which consists of four Video Game Brands segments: United States, Canada, Australia and Europe, and Technology Brands segment. Each of the Video Game Brands segments consists primarily of retail operations, with all stores engaged in the sale of new and pre-owned video game systems, software and accessories, which it refers to as video game products. Its Video Game Brands stores sell various types of digital products, including downloadable content, network points cards, prepaid digital, and also sell certain mobile and consumer electronics products and collectible products. Its Technology Brands segment includes its Spring Mobile and Simply Mac businesses.

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