GAP (NYSE: GPS) and Kate Spade & Co (NYSE:KATE) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Institutional and Insider Ownership

54.8% of GAP shares are owned by institutional investors. Comparatively, 97.9% of Kate Spade & Co shares are owned by institutional investors. 27.3% of GAP shares are owned by insiders. Comparatively, 0.8% of Kate Spade & Co shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

GAP has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, Kate Spade & Co has a beta of 1.75, meaning that its share price is 75% more volatile than the S&P 500.

Dividends

GAP pays an annual dividend of $0.92 per share and has a dividend yield of 2.7%. Kate Spade & Co does not pay a dividend. GAP pays out 42.4% of its earnings in the form of a dividend. Kate Spade & Co has raised its dividend for 7 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings for GAP and Kate Spade & Co, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
GAP 3 20 6 0 2.10
Kate Spade & Co 1 13 1 0 2.00

GAP presently has a consensus price target of $28.13, suggesting a potential downside of 18.28%. Kate Spade & Co has a consensus price target of $20.04, suggesting a potential upside of 8.39%. Given Kate Spade & Co’s higher possible upside, analysts clearly believe Kate Spade & Co is more favorable than GAP.

Valuation and Earnings

This table compares GAP and Kate Spade & Co’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
GAP $15.52 billion 0.86 $676.00 million $2.17 15.87
Kate Spade & Co N/A N/A N/A $1.10 16.81

GAP has higher revenue and earnings than Kate Spade & Co. GAP is trading at a lower price-to-earnings ratio than Kate Spade & Co, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares GAP and Kate Spade & Co’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
GAP 5.57% 27.47% 10.56%
Kate Spade & Co 0.44% 1.11% 0.43%

Summary

GAP beats Kate Spade & Co on 9 of the 14 factors compared between the two stocks.

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.

Kate Spade & Co Company Profile

Kate Spade & Company is engaged in the design and marketing of a range of accessories and apparel. It operates through three segments. The KATE SPADE North America segment consists of the Company’s kate spade new york and JACK SPADE brands in North America. The KATE SPADE International segment consists of the Company’s kate spade new york and JACK SPADE brands in international markets, which operates principally in Japan, Asia (excluding Japan), Europe and Latin America). The Adelington Design Group segment primarily consists of exclusive arrangements to supply jewelry for the LIZ CLAIBORNE and MONET brands. In addition, the Adelington Design Group segment serves J.C. Penney Corporation, Inc. (JCPenney) through exclusive supplier agreements for the LIZ CLAIBORNE and MONET jewelry lines. As of December 31, 2016, it operated 98 the United States Specialty Retail Stores; 35 Foreign Specialty Retail Stores; 65 the United States Outlet Stores; 17 Foreign Outlet Stores, and 54 Concessions.

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