Analyzing GNC (GNC) & Safeway (SWY)

Safeway (NYSE: SWY) and GNC (NYSE:GNC) are both food retail & distribution – nec companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, profitability, earnings, valuation, analyst recommendations, risk and institutional ownership.

Earnings and Valuation

This table compares Safeway and GNC’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Safeway N/A N/A N/A $0.12 292.50
GNC $2.54 billion 0.14 -$286.25 million ($5.46) -0.96

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

Dividends

GNC pays an annual dividend of $0.20 per share and has a dividend yield of 3.8%. Safeway does not pay a dividend. GNC pays out -3.7% of its earnings in the form of a dividend. Safeway has increased its dividend for 4 consecutive years and GNC has increased its dividend for 12 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Safeway and GNC, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Safeway 0 0 0 0 N/A
GNC 5 2 0 0 1.29

GNC has a consensus target price of $7.58, suggesting a potential upside of 44.17%. Given GNC’s higher probable upside, analysts clearly believe GNC is more favorable than Safeway.

Volatility & Risk

Safeway has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500. Comparatively, GNC has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500.

Insider and Institutional Ownership

61.9% of GNC shares are held by institutional investors. 1.9% of GNC shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Safeway and GNC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Safeway -0.26% -1.66% -0.69%
GNC -15.11% -133.37% 3.95%

Summary

GNC beats Safeway on 8 of the 12 factors compared between the two stocks.

About Safeway

Safeway Inc., is an food and drug retail company. The Company owns and operates GroceryWorks.com Operating Company, LLC, an online grocery channel doing business under the names Safeway.com and Vons.com. Blackhawk, a majority-owned subsidiary of Safeway, is a prepaid payment network utilizing proprietary technology to offer gift cards, other prepaid products and payment services. Blackhawk’s payment network supports its three primary constituents: consumers who purchase the products and services Blackhawk offers, content providers who offer branded products that are redeemable for goods and services, and distribution partners who sell the products. Blackhawk’s product offerings include gift cards, prepaid telecom products and prepaid financial services products, including general purpose reloadable cards and Blackhawk’s reload network.

About GNC

GNC Holdings, Inc. is a specialty retailer of health, wellness and performance products, which include protein, performance supplements, weight management supplements, vitamins, herbs and greens, wellness supplements, health and beauty, food and drink and other general merchandise. The Company’s operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products. It operates in three segments: U.S. and Canada, International and Manufacturing/Wholesale. Its U.S. and Canada segment generates revenues primarily from sales of products to customers at its Company-owned stores in the United States, Canada and Puerto Rico, through its Websites, GNC.com and LuckyVitamin.com. Its International segment generates revenue primarily to its international franchisees. Its Manufacturing/Wholesale segment comprises its manufacturing operations in South Carolina and its wholesale partner relationships.

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