Critical Analysis: HD Supply (HDS) and W. W. Grainger (GWW)

HD Supply (NASDAQ: HDS) and W. W. Grainger (NYSE:GWW) are both industrial products companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, dividends, profitability, valuation, earnings, risk and institutional ownership.

Risk & Volatility

HD Supply has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500. Comparatively, W. W. Grainger has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500.

Earnings and Valuation

This table compares HD Supply and W. W. Grainger’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HD Supply $5.12 billion 1.41 $970.00 million $2.31 16.81
W. W. Grainger $10.42 billion 1.51 $585.73 million $11.46 24.51

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

Dividends

W. W. Grainger pays an annual dividend of $5.12 per share and has a dividend yield of 1.8%. HD Supply does not pay a dividend. W. W. Grainger pays out 44.7% of its earnings in the form of a dividend. W. W. Grainger has raised its dividend for 46 consecutive years.

Insider and Institutional Ownership

97.1% of HD Supply shares are held by institutional investors. Comparatively, 83.8% of W. W. Grainger shares are held by institutional investors. 0.7% of HD Supply shares are held by insiders. Comparatively, 10.1% of W. W. Grainger shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares HD Supply and W. W. Grainger’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HD Supply 16.79% 37.90% 9.40%
W. W. Grainger 5.62% 35.76% 11.51%

Analyst Recommendations

This is a breakdown of current ratings and target prices for HD Supply and W. W. Grainger, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HD Supply 0 10 6 0 2.38
W. W. Grainger 4 12 2 0 1.89

HD Supply currently has a consensus target price of $40.38, indicating a potential upside of 4.03%. W. W. Grainger has a consensus target price of $240.25, indicating a potential downside of 14.52%. Given HD Supply’s stronger consensus rating and higher possible upside, research analysts clearly believe HD Supply is more favorable than W. W. Grainger.

Summary

HD Supply beats W. W. Grainger on 9 of the 17 factors compared between the two stocks.

About HD Supply

HD Supply Holdings, Inc. operates as an industrial distributor in North America. It operates through two segments, Facilities Maintenance, and Construction & Industrial. The Facilities Maintenance segment offers electrical and lighting items, plumbing, appliances, janitorial supplies, hardware, kitchen and bath cabinets, window coverings, textiles and guest amenities, healthcare maintenance, and water and wastewater treatment products, as well as heating, ventilating, and air conditioning products. The Construction & Industrial segment offers tilt-up brace systems, forming and shoring systems, concrete chemicals, hand and power tools, cutting tools, rebars, ladders, safety and fall arrest equipment, specialty screws and fasteners, sealants and adhesives, drainage pipes, geo-synthetics, erosion and sediment control equipment, and other engineered materials used in non-residential and residential construction. This segment also provides home improvement solutions, such as light remodeling and construction supplies, kitchen and bath cabinets, windows, plumbing materials, electrical equipment, and other products primarily to small remodeling contractors and trade professionals through local retail outlets. In addition, it offers pre-bid assistance, product submittals, engineering, and tool repair services. It serves contractors, maintenance professionals, home builders, industrial businesses, and government entities through a network of branches and professional sales force, as well as through print catalogs and e-commerce. The company was formerly known as HDS Investment Holding, Inc. and changed its name to HD Supply Holdings, Inc. in April 2013. HD Supply Holdings, Inc. is headquartered in Atlanta, Georgia.

About W. W. Grainger

W.W. Grainger, Inc. distributes maintenance, repair, and operating (MRO) supplies; and other related products and services that are used by businesses and institutions in the United States, Canada, Europe, Asia, and Latin America. The company offers material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, metalworking tools, and various other products. It also offers inventory management solutions; and distributes fasteners, gloves, ladders, motors, and janitorial supplies. The company serves small and mid-sized businesses, large corporations, government entities, and other institutions. It offers its products through various branches, sales and service representatives, contact centers, distribution centers, and catalogs, as well as through Websites. W.W. Grainger, Inc. was founded in 1927 and is based in Lake Forest, Illinois.

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