Critical Comparison: Casey’s General Stores (CASY) vs. Lithia Motors (LAD)

Casey’s General Stores (NASDAQ: CASY) and Lithia Motors (NYSE:LAD) are both mid-cap retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Institutional and Insider Ownership

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92.7% of Casey’s General Stores shares are held by institutional investors. Comparatively, 99.9% of Lithia Motors shares are held by institutional investors. 1.3% of Casey’s General Stores shares are held by company insiders. Comparatively, 6.0% of Lithia Motors shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Casey’s General Stores and Lithia Motors, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Casey’s General Stores 0 6 4 0 2.40
Lithia Motors 0 4 5 0 2.56

Casey’s General Stores currently has a consensus target price of $126.14, indicating a potential upside of 30.57%. Lithia Motors has a consensus target price of $127.67, indicating a potential upside of 26.27%. Given Casey’s General Stores’ higher probable upside, equities research analysts clearly believe Casey’s General Stores is more favorable than Lithia Motors.

Profitability

This table compares Casey’s General Stores and Lithia Motors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Casey’s General Stores 4.03% 12.70% 4.71%
Lithia Motors 2.34% 20.61% 4.81%

Valuation and Earnings

This table compares Casey’s General Stores and Lithia Motors’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Casey’s General Stores $7.51 billion 0.48 $177.48 million $4.48 21.56
Lithia Motors $10.09 billion 0.25 $245.21 million $8.39 12.05

Lithia Motors has higher revenue and earnings than Casey’s General Stores. Lithia Motors is trading at a lower price-to-earnings ratio than Casey’s General Stores, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Casey’s General Stores has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500. Comparatively, Lithia Motors has a beta of 1.72, suggesting that its share price is 72% more volatile than the S&P 500.

Dividends

Casey’s General Stores pays an annual dividend of $1.04 per share and has a dividend yield of 1.1%. Lithia Motors pays an annual dividend of $1.16 per share and has a dividend yield of 1.1%. Casey’s General Stores pays out 23.2% of its earnings in the form of a dividend. Lithia Motors pays out 13.8% 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. Casey’s General Stores has raised its dividend for 15 consecutive years and Lithia Motors has raised its dividend for 7 consecutive years. Lithia Motors is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Lithia Motors beats Casey’s General Stores on 12 of the 17 factors compared between the two stocks.

Casey’s General Stores Company Profile

Casey's General Stores, Inc., together with its subsidiaries, operates convenience stores under the Casey's and Casey's General Store names. The company's stores offer a selection of food, including freshly prepared foods, such as pizza, donuts, and sandwiches; beverage and tobacco products; health and beauty aids; automotive products; school supplies, housewares, and pet supplies; and other nonfood items. Its stores also offer fuel for sale on a self-service basis. In addition, the company operates two stores under the Tobacco City name primarily selling tobacco products; and one grocery store. As of November 29, 2017, it operated approximately 2,000 stores in 15 Midwestern states. Casey's General Stores, Inc. was founded in 1959 and is headquartered in Ankeny, Iowa.

Lithia Motors Company Profile

Lithia Motors, Inc. operates automotive franchises, and retails new and used vehicles in the United States. The company operates in three segments: Domestic, Import, and Luxury. It sells new and used cars, replacement parts, vehicle service contracts, vehicle protection products, and credit insurance products; provides vehicle maintenance, warranty, paint, and repair services; and arranges related financing. As of February 23, 2018, the company offered 30 brands of new vehicles and various brands of used vehicles in 171 stores in the United States, as well as through online at approximately 200 Websites. Lithia Motors, Inc. was founded in 1946 and is headquartered in Medford, Oregon.

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