Rent-A-Center (RCII) versus Aaron’s (AAN) Head to Head Analysis

Rent-A-Center (NASDAQ: RCII) and Aaron’s (NYSE:AAN) are both consumer discretionary companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, risk and valuation.

Earnings & Valuation

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This table compares Rent-A-Center and Aaron’s’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rent-A-Center $2.70 billion 0.20 $6.65 million ($0.54) -19.17
Aaron’s $3.38 billion 0.98 $292.53 million $2.56 18.47

Aaron’s has higher revenue and earnings than Rent-A-Center. Rent-A-Center is trading at a lower price-to-earnings ratio than Aaron’s, indicating that it is currently the more affordable of the two stocks.

Dividends

Rent-A-Center pays an annual dividend of $0.08 per share and has a dividend yield of 0.8%. Aaron’s pays an annual dividend of $0.12 per share and has a dividend yield of 0.3%. Rent-A-Center pays out -14.8% of its earnings in the form of a dividend. Aaron’s pays out 4.7% 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. Aaron’s has raised its dividend for 11 consecutive years. Rent-A-Center is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Rent-A-Center has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500. Comparatively, Aaron’s has a beta of 0.05, meaning that its share price is 95% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Rent-A-Center and Aaron’s, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rent-A-Center 1 4 0 0 1.80
Aaron’s 1 3 7 1 2.67

Rent-A-Center presently has a consensus target price of $8.25, indicating a potential downside of 20.29%. Aaron’s has a consensus target price of $46.50, indicating a potential downside of 1.65%. Given Aaron’s’ stronger consensus rating and higher possible upside, analysts plainly believe Aaron’s is more favorable than Rent-A-Center.

Profitability

This table compares Rent-A-Center and Aaron’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rent-A-Center 0.25% -11.30% -1.97%
Aaron’s 8.65% 11.64% 7.06%

Summary

Aaron’s beats Rent-A-Center on 13 of the 16 factors compared between the two stocks.

About Rent-A-Center

Rent-A-Center, Inc., together with its subsidiaries, leases household durable goods to customers on a rent-to-own basis. The company operates through four segments: Core U.S., Acceptance Now, Mexico, and Franchising. It offers durable products, such as consumer electronics; appliances; computers, including tablets; smartphones; and furniture, including accessories under rental purchase agreements. The company also provides merchandise on an installment sales basis; and offers the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks within retailer's locations. It operates retail installment sales stores under the Get It Now and Home Choice names; and rent-to-own and franchised rent-to-own stores under the Rent-A-Centre, ColorTyme, and RimTyme names. As of December 31, 2017, the company owned and operated approximately 2,381 stores in the United States, Canada, and Puerto Rico, including 45 retail installment sales stores; 1,106 Acceptance Now staffed locations in 42 states and Puerto Rico; 125 Acceptance Now Direct locations; and 131 stores in Mexico, as well as franchised 225 rent-to-own stores in 31 states under the Rent-A-Center, ColorTyme, and RimTyme names. Rent-A-Center, Inc. was founded in 1986 and is headquartered in Plano, Texas.

About Aaron’s

Aaron's, Inc. operates as an omnichannel provider of lease-purchase solutions. It operates through three segments: Progressive Leasing, Aaron's Business, and DAMI. The company engages in the sale, lease ownership, and specialty retailing of furniture, consumer electronics, home appliances, and accessories. As of February 15, 2018, it operated approximately 1,726 company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. Aaron's, Inc. was founded in 1955 and is headquartered in Atlanta, Georgia.

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