Citi Trends (NASDAQ: CTRN) and Gap, Inc. (The) (NYSE:GPS) are both retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, profitability, dividends and institutional ownership.

Volatility and Risk

Citi Trends has a beta of 0.42, indicating that its share price is 58% less volatile than the S&P 500. Comparatively, Gap, Inc. (The) has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500.

Profitability

This table compares Citi Trends and Gap, Inc. (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Citi Trends 1.88% 6.93% 4.69%
Gap, Inc. (The) 5.42% 28.50% 10.64%

Analyst Recommendations

This is a breakdown of recent recommendations for Citi Trends and Gap, Inc. (The), as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Citi Trends 0 0 0 0 N/A
Gap, Inc. (The) 2 18 6 0 2.15

Gap, Inc. (The) has a consensus price target of $26.85, suggesting a potential upside of 3.32%. Given Gap, Inc. (The)’s higher possible upside, analysts clearly believe Gap, Inc. (The) is more favorable than Citi Trends.

Valuation & Earnings

This table compares Citi Trends and Gap, Inc. (The)’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Citi Trends $712.38 million 0.44 $35.16 million $0.91 23.91
Gap, Inc. (The) $15.47 billion 0.66 $2.01 billion $2.10 12.38

Gap, Inc. (The) has higher revenue and earnings than Citi Trends. Gap, Inc. (The) is trading at a lower price-to-earnings ratio than Citi Trends, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

91.1% of Citi Trends shares are held by institutional investors. Comparatively, 56.4% of Gap, Inc. (The) shares are held by institutional investors. 4.6% of Citi Trends shares are held by company insiders. Comparatively, 27.3% of Gap, Inc. (The) shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.5%. Gap, Inc. (The) pays an annual dividend of $0.92 per share and has a dividend yield of 3.5%. Citi Trends pays out 35.2% of its earnings in the form of a dividend. Gap, Inc. (The) pays out 43.8% 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, Inc. (The) has increased its dividend for 7 consecutive years. Gap, Inc. (The) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Gap, Inc. (The) beats Citi Trends on 13 of the 16 factors compared between the two stocks.

Citi Trends Company Profile

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

Gap, Inc. (The) 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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