All You Need to Know to Stay Savvy about Smart & Final Stores

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Part 16
All You Need to Know to Stay Savvy about Smart & Final Stores PART 16 OF 18

Comparing Smart & Final Stores’ Returns to Its Peers’

A look at Smart & Final Stores’ ROA and ROE

In the current section, we’ll discuss the returns earned by Smart & Final Stores (SFS) on its assets and its equity. We’ll also compare SFS’s ROA (return on assets) and ROE (return on equity) to those of its supermarket and mass merchandise peers.

ROA measures the efficiency with which a company’s management uses its assets. It’s calculated by dividing a company’s net profit with its assets. ROE, on the other hand, measures the net profits earned by a company’s equity shareholders as a percentage of equity capital invested.

Comparing Smart &amp; Final Stores&#8217; Returns to Its Peers&#8217;

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The above comparison is for the last reported quarter. The quarter-end dates for the above retailers were as follows:

  • Smart & Final Stores (SFS): March 27, 2016
  • Kroger (KR): January 30, 2016
  • Whole Foods Market (WFM): April 10, 2016
  • Sprouts Farmers Market (SFM): April 3, 2016
  • Walmart (WMT): April 30, 2016
  • Costco (COST): May 10, 2016

SFS has the lowest returns among its peers

As can be seen in the above chart, SFS had the lowest ROA and ROE compared to its peers. The company’s ROA stood at ~2% in its last reported quarter compared to Kroger’s 6.3%, Walmart’s 7.2%, and Costco’s 6.9%.

SFS’s ROE was also the lowest at 7.1%. Kroger’s, Costco’s, and Walmart’s ROEs were 33%, 21%, 19%, respectively.

We can understand the reason for the difference by comparing the underlying net margins of the companies. SFS’s net margin of 0.94% is also the lowest in its peer group. While Kroger’s net margin stood at 1.8%, Costco had a net margin of ~2%.

SFS makes up 0.26% of the SPDR S&P Retail ETF (XRT) and 0.1% of the iShares Morningstar Small-Cap ETF (JKJ).

Let’s discuss Smart & Final Stores’ stock market performance in the next article.


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