Analyzing CarMax (NYSE:KMX) and GrowGeneration (NASDAQ:GRWG)

CarMax (NYSE:KMX) and GrowGeneration (NASDAQ:GRWG) are both consumer discretionary companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, valuation, earnings, dividends, institutional ownership, risk and analyst recommendations.

Profitability

This table compares CarMax and GrowGeneration’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CarMax	0.84%	6.64%	1.53%
GrowGeneration	-10.07%	-17.44%	-11.52%

Risk and Volatility

CarMax has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500. Comparatively, GrowGeneration has a beta of 2.56, suggesting that its share price is 156% more volatile than the S&P 500.

Insider & Institutional Ownership

36.0% of GrowGeneration shares are owned by institutional investors. 1.0% of CarMax shares are owned by insiders. Comparatively, 8.1% of GrowGeneration shares are owned by 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 and Valuation

This table compares CarMax and GrowGeneration”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CarMax	$25.88 billion	0.31	$247.29 million	$1.53	37.10
GrowGeneration	$161.74 million	0.58	-$24.05 million	($0.27)	-5.85

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for CarMax and GrowGeneration, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CarMax	4	14	2	0	1.90
GrowGeneration	1	1	1	0	2.00

CarMax currently has a consensus target price of $51.87, suggesting a potential downside of 8.63%. GrowGeneration has a consensus target price of $2.50, suggesting a potential upside of 58.23%. Given GrowGeneration’s stronger consensus rating and higher possible upside, analysts clearly believe GrowGeneration is more favorable than CarMax.

Summary

CarMax beats GrowGeneration on 8 of the 14 factors compared between the two stocks.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. The company was founded in 1993 and is based in Richmond, Virginia.

About GrowGeneration

GrowGeneration Corp., through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States. The company engages in the marketing and distribution of nutrients, additives, growing media, lighting, and environmental control systems, as well as other indoor and outdoor growing products. It operates a chain of stores in California, Colorado, Michigan, Maine, Oklahoma, Oregon, Washington, Montana, New York, Ohio, Mississippi, Missouri, Arizona, Rhode Island, Florida, Massachusetts, Virginia, New Jersey, and New Mexico, as well as growgeneration.com, an online superstore for cultivators, a wholesale business for resellers, HRG Distribution, and benching, racking, and storage solutions and MMI. The company was formerly known as Easylife Corp. GrowGeneration Corp. was founded in 2008 and is based in Greenwood Village, Colorado.