Group 1 Automotive (NYSE: GPI) and CarMax (NYSE:KMX) are both retail/wholesale companies, but which is the better business? We will compare the two companies based on the strength of their dividends, valuation, earnings, analyst recommendations, profitabiliy, institutional ownership and risk.
Volatility & Risk
Group 1 Automotive has a beta of 1.62, suggesting that its share price is 62% more volatile than the S&P 500. Comparatively, CarMax has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500.
Profitability
This table compares Group 1 Automotive and CarMax’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Group 1 Automotive | 1.26% | 15.73% | 3.28% |
| CarMax | 4.07% | 21.72% | 4.19% |
Dividends
Group 1 Automotive pays an annual dividend of $0.96 per share and has a dividend yield of 1.7%. CarMax does not pay a dividend. Group 1 Automotive pays out 14.7% of its earnings in the form of a dividend. Group 1 Automotive has increased its dividend for 7 consecutive years.
Analyst Recommendations
This is a breakdown of current recommendations and price targets for Group 1 Automotive and CarMax, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Group 1 Automotive | 1 | 4 | 0 | 0 | 1.80 |
| CarMax | 1 | 4 | 7 | 0 | 2.50 |
Group 1 Automotive presently has a consensus price target of $65.67, suggesting a potential upside of 15.14%. CarMax has a consensus price target of $68.73, suggesting a potential upside of 5.36%. Given Group 1 Automotive’s higher possible upside, analysts plainly believe Group 1 Automotive is more favorable than CarMax.
Earnings & Valuation
This table compares Group 1 Automotive and CarMax’s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| Group 1 Automotive | $10.69 billion | 0.11 | $407.19 million | $6.51 | 8.76 |
| CarMax | $17.08 billion | 0.70 | $1.30 billion | $3.50 | 18.64 |
CarMax has higher revenue and earnings than Group 1 Automotive. Group 1 Automotive is trading at a lower price-to-earnings ratio than CarMax, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
93.5% of Group 1 Automotive shares are owned by institutional investors. 7.0% of Group 1 Automotive shares are owned by company insiders. Comparatively, 1.9% of CarMax shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Summary
CarMax beats Group 1 Automotive on 10 of the 17 factors compared between the two stocks.
About Group 1 Automotive
Group 1 Automotive, Inc. is an operator in the automotive retail industry. The Company, through its dealerships, sells new and used cars and light trucks; arranges related vehicle financing; sells service and insurance contracts; provides automotive maintenance and repair services, and sells vehicle parts. The Company operates through three segments: the U.S., which includes the activities of its corporate office, the United Kingdom and Brazil. The Company owned and operated 224 franchises, representing 32 brands of automobiles, at 171 dealership locations and 47 collision centers.
About CarMax
CarMax, Inc. (CarMax) is a holding company. The Company is a retailer of used vehicles. The Company operates through two segments: CarMax Sales Operations and CarMax Auto Finance (CAF). The Company’s CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations, excluding financing provided by CAF. The Company’s CAF segment consists of its own finance operation that provides vehicle financing through CarMax stores. The Company operates approximately 160 used car stores in over 70 metropolitan markets. The Company’s products and services include retail merchandising, wholesale auctions, extended protection plans (EPPs), reconditioning and service, and customer credit. The Company’s CarMax Sales Operations segment sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges financing options for customers. CAF operates in the auto finance sector of the consumer finance market.
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