American Eagle Outfitters (AEO) & GAP (GPS) Head to Head Review
American Eagle Outfitters (NYSE: AEO) and GAP (NYSE:GPS) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, earnings, risk, valuation and dividends.
This table compares American Eagle Outfitters and GAP’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|American Eagle Outfitters||4.50%||17.42%||11.63%|
American Eagle Outfitters has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, GAP has a beta of 0.86, indicating that its stock price is 14% less volatile than the S&P 500.
This is a summary of current recommendations and price targets for American Eagle Outfitters and GAP, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|American Eagle Outfitters||1||6||9||0||2.50|
American Eagle Outfitters presently has a consensus target price of $16.25, suggesting a potential downside of 11.88%. GAP has a consensus target price of $28.77, suggesting a potential downside of 13.52%. Given American Eagle Outfitters’ stronger consensus rating and higher probable upside, analysts plainly believe American Eagle Outfitters is more favorable than GAP.
American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.7%. GAP pays an annual dividend of $0.92 per share and has a dividend yield of 2.8%. American Eagle Outfitters pays out 54.3% of its earnings in the form of a dividend. GAP pays out 42.2% 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. GAP is clearly the better dividend stock, given its higher yield and lower payout ratio.
Institutional and Insider Ownership
83.2% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 55.0% of GAP shares are held by institutional investors. 5.8% of American Eagle Outfitters shares are held by company insiders. Comparatively, 27.3% of GAP shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Valuation and Earnings
This table compares American Eagle Outfitters and GAP’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|American Eagle Outfitters||$3.61 billion||0.91||$212.44 million||$0.92||20.04|
|GAP||$15.52 billion||0.83||$676.00 million||$2.18||15.26|
GAP has higher revenue and earnings than American Eagle Outfitters. GAP is trading at a lower price-to-earnings ratio than American Eagle Outfitters, indicating that it is currently the more affordable of the two stocks.
American Eagle Outfitters Company Profile
American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.
GAP Company Profile
The Gap, Inc. (Gap Inc.) is an apparel retail company. The Company offers apparel, accessories and personal care products for men, women and children under the Gap, Banana Republic, Old Navy, Athleta and Intermix brands. Its products are available to customers online through Company-owned Websites and through the use of third-parties that provide logistics and fulfillment services. In addition to operating in the specialty, outlet, online and franchise channels, it also uses the Company’s omni-channel capabilities to bridge the digital world and physical stores. Its omni-channel services, including order-in-store, reserve-in-store, find-in-store and ship-from-store are tailored across its portfolio of brands. It also sells products that are designed and manufactured by branded third-parties, especially at its Intermix brands. It has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico.
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