Abercrombie & Fitch (NYSE: ANF) and American Eagle Outfitters (NYSE:AEO) are both retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, institutional ownership, analyst recommendations and risk.

Institutional and Insider Ownership

89.0% of American Eagle Outfitters shares are held by institutional investors. 0.9% of Abercrombie & Fitch shares are held by insiders. Comparatively, 5.8% of American Eagle Outfitters shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Abercrombie & Fitch and American Eagle Outfitters’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Abercrombie & Fitch -0.55% -1.26% -0.67%
American Eagle Outfitters 4.85% 18.25% 12.17%

Risk & Volatility

Abercrombie & Fitch has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.

Dividends

Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 7.1%. American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 4.1%. Abercrombie & Fitch pays out -296.3% of its earnings in the form of a dividend. American Eagle Outfitters pays out 51.5% 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. Abercrombie & Fitch is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Abercrombie & Fitch and American Eagle Outfitters’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Abercrombie & Fitch $3.30 billion 0.23 $181.49 million ($0.27) -41.67
American Eagle Outfitters $3.62 billion 0.60 $496.35 million $0.97 12.58

American Eagle Outfitters has higher revenue and earnings than Abercrombie & Fitch. Abercrombie & Fitch 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.

Analyst Ratings

This is a summary of current recommendations and price targets for Abercrombie & Fitch and American Eagle Outfitters, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Abercrombie & Fitch 9 11 4 0 1.79
American Eagle Outfitters 3 8 9 0 2.30

Abercrombie & Fitch currently has a consensus target price of $13.70, suggesting a potential upside of 21.78%. American Eagle Outfitters has a consensus target price of $14.93, suggesting a potential upside of 22.34%. Given American Eagle Outfitters’ stronger consensus rating and higher probable upside, analysts plainly believe American Eagle Outfitters is more favorable than Abercrombie & Fitch.

Summary

American Eagle Outfitters beats Abercrombie & Fitch on 13 of the 15 factors compared between the two stocks.

About Abercrombie & Fitch

Abercrombie & Fitch Co. is a specialty retailer who primarily sells its products through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company operates through two segments: Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister and Gilly Hicks brands. The Company offers an array of apparel products, including knit tops, woven shirts, graphic t-shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and swimwear, and personal care products and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. The Company has operations in North America, Europe, Asia and the Middle East. As of January 28, 2017, the Company operated 709 stores in the United States and 189 stores outside of the United States.

About American Eagle Outfitters

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.

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