Analyzing Alibaba Group (NYSE:BABA) and Vipshop (NYSE:VIPS)

Vipshop (NYSE:VIPS) and Alibaba Group (NYSE:BABA) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, valuation, institutional ownership, profitability, earnings and dividends.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Vipshop and Alibaba Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Vipshop	2	4	3	1	2.30
Alibaba Group	0	6	13	2	2.81

Vipshop currently has a consensus target price of $17.16, indicating a potential upside of 33.52%. Alibaba Group has a consensus target price of $182.89, indicating a potential upside of 65.31%. Given Alibaba Group’s stronger consensus rating and higher probable upside, analysts plainly believe Alibaba Group is more favorable than Vipshop.

Dividends

Vipshop pays an annual dividend of $0.60 per share and has a dividend yield of 4.7%. Alibaba Group pays an annual dividend of $1.03 per share and has a dividend yield of 0.9%. Vipshop pays out 19.9% of its earnings in the form of a dividend. Alibaba Group pays out 24.9% 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. Vipshop is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Vipshop and Alibaba Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Vipshop	$15.15 billion	0.41	$1.04 billion	$3.02	4.25
Alibaba Group	$148.40 billion	1.85	$15.02 billion	$4.13	26.79

Alibaba Group has higher revenue and earnings than Vipshop. Vipshop is trading at a lower price-to-earnings ratio than Alibaba Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Vipshop and Alibaba Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Vipshop	9.88%	12.63%	7.09%
Alibaba Group	7.00%	4.79%	2.80%

Risk & Volatility

Vipshop has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500. Comparatively, Alibaba Group has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500.

Institutional & Insider Ownership

48.8% of Vipshop shares are held by institutional investors. Comparatively, 13.5% of Alibaba Group shares are held by institutional investors. 29.5% of Vipshop shares are held by company insiders. Comparatively, 12.5% of Alibaba Group 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.

Summary

Alibaba Group beats Vipshop on 9 of the 17 factors compared between the two stocks.

About Vipshop

Vipshop Holdings Limited operates online platforms in the People's Republic of China. It operates in Vip.com, Shan Shan Outlets, and Others segments. The company offers womenswear, menswear, sportswear and sporting goods, shoes and bags, accessories, baby and children products, skincare and cosmetics, home goods and other lifestyle products, and supermarket products. It also provides internet finance services, including consumer and supplier financing. In addition, the company engages in warehousing, retail business, product procurement, and software development and information technology support activities. The company provides branded products through its vip.com and vipshop.com online platforms, as well as through retail stores. Vipshop Holdings Limited was founded in 2008 and is headquartered in Guangzhou, the People's Republic of China.

About Alibaba Group

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others. It operates Taobao, a digital retail platform; Tmall, a third-party online and mobile commerce platform; Alimama, a monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, Trendyol, and Daraz that are e-commerce platforms; Freshippo, a retail platform for groceries and fresh goods; and Tmall Global, an import e-commerce platform. The company also operates Cainiao Network logistic services platform; Ele.me, an on-demand delivery and local services platform; Koubei, a restaurant and local services guide platform; and Fliggy, an online travel platform. In addition, it offers pay-for-performance, in-feed, and display marketing services; and Taobao Ad Network and Exchange, a real-time online bidding marketing exchange. Further, the company provides elastic computing, storage, network, security, database, big data, and IoT services; and hardware, software license, software installation, and application development and maintenance services. Additionally, it operates Youku, an online video platform; Quark, a platform for information search, storage, and consumption; Alibaba Pictures and other content platforms that provide online videos, films, live events, news feeds, literature, music, and others; Amap, a mobile digital map, navigation, and real-time traffic information app; DingTalk, a business efficiency mobile app; and Tmall Genie smart speaker. The company was incorporated in 1999 and is based in Hangzhou, the People's Republic of China.