AutoZone (NYSE:AZO) versus American Eagle Outfitters (NYSE:AEO) Critical Analysis

American Eagle Outfitters (NYSE:AEO) and AutoZone (NYSE:AZO) are both consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, institutional ownership, dividends, risk, earnings, analyst recommendations and profitability.

Risk and Volatility

American Eagle Outfitters has a beta of 1.33, meaning that its stock price is 33% more volatile than the S&P 500. Comparatively, AutoZone has a beta of 0.34, meaning that its stock price is 66% less volatile than the S&P 500.

Insider and Institutional Ownership

97.3% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 92.7% of AutoZone shares are held by institutional investors. 8.9% of American Eagle Outfitters shares are held by company insiders. Comparatively, 2.6% of AutoZone shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares American Eagle Outfitters and AutoZone”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Eagle Outfitters	$5.50 billion	0.45	$191.98 million	$1.96	7.57
AutoZone	$18.94 billion	2.47	$2.50 billion	$145.45	19.71

AutoZone has higher revenue and earnings than American Eagle Outfitters. American Eagle Outfitters is trading at a lower price-to-earnings ratio than AutoZone, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings for American Eagle Outfitters and AutoZone, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Eagle Outfitters	1	11	2	1	2.20
AutoZone	0	6	20	1	2.81

American Eagle Outfitters currently has a consensus target price of $19.36, indicating a potential upside of 30.44%. AutoZone has a consensus target price of $3,946.96, indicating a potential upside of 37.67%. Given AutoZone’s stronger consensus rating and higher probable upside, analysts clearly believe AutoZone is more favorable than American Eagle Outfitters.

Profitability

This table compares American Eagle Outfitters and AutoZone’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Eagle Outfitters	5.91%	23.63%	9.59%
AutoZone	12.40%	-80.35%	12.33%

Summary

AutoZone beats American Eagle Outfitters on 10 of the 14 factors compared between the two stocks.

About American Eagle Outfitters

American Eagle Outfitters, Inc. operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand; and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. It also offers menswear products under the Todd Snyder New York brand; and fashion clothing and accessories under the Unsubscribed brand. The company sells its products through own and licensed retail stores; concession-based shops-within-shops; and digital channels, such as www.ae.com, www.aerie.com, www.toddsnyder.com, and www.unsubscribed.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.

About AutoZone

AutoZone, Inc. retails and distributes automotive replacement parts and accessories in the United States, Mexico, and Brazil. The company provides various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. It also offers A/C compressors, batteries and accessories, bearings, belts and hoses, calipers, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, starters and alternators, thermostats, and water pumps, as well as tire repairs. In addition, the company provides maintenance products, such as antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, cabin, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers. Further, it offers air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, tools, vehicle entertainment systems, and wash and wax products, as well as towing services. Additionally, the company provides a sales program that offers commercial credit and delivery of parts and other products; sells automotive diagnostic and repair software under the ALLDATA brand through alldata.com and alldatadiy.com; and automotive hard parts, maintenance items, accessories, and non-automotive products through autozone.com. AutoZone, Inc. was founded in 1979 and is headquartered in Memphis, Tennessee.