Urban Outfitters (NASDAQ: URBN) and L Brands (NYSE:LB) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Dividends

L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 6.6%. Urban Outfitters does not pay a dividend. L Brands pays out 70.4% of its earnings in the form of a dividend. L Brands has increased its dividend for 6 consecutive years.

Analyst Recommendations

This is a summary of recent ratings and price targets for Urban Outfitters and L Brands, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Urban Outfitters 2 17 6 0 2.16
L Brands 4 14 10 0 2.21

Urban Outfitters presently has a consensus target price of $22.87, indicating a potential upside of 5.78%. L Brands has a consensus target price of $49.00, indicating a potential upside of 34.03%. Given L Brands’ stronger consensus rating and higher possible upside, analysts clearly believe L Brands is more favorable than Urban Outfitters.

Profitability

This table compares Urban Outfitters and L Brands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Urban Outfitters 4.92% 13.61% 9.27%
L Brands 8.04% -103.04% 11.95%

Volatility and Risk

Urban Outfitters has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500. Comparatively, L Brands has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500.

Earnings & Valuation

This table compares Urban Outfitters and L Brands’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Urban Outfitters $3.53 billion 0.68 $407.50 million $1.49 14.51
L Brands $12.26 billion 0.86 $2.37 billion $3.41 10.72

L Brands has higher revenue and earnings than Urban Outfitters. L Brands is trading at a lower price-to-earnings ratio than Urban Outfitters, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

84.0% of Urban Outfitters shares are held by institutional investors. Comparatively, 75.2% of L Brands shares are held by institutional investors. 26.3% of Urban Outfitters shares are held by insiders. Comparatively, 16.5% of L Brands shares are held 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.

Summary

L Brands beats Urban Outfitters on 11 of the 17 factors compared between the two stocks.

About Urban Outfitters

Urban Outfitters, Inc. is a lifestyle specialty retail company. The Company operates through two segments: Retail and Wholesale. The Company’s Retail segment consists of its Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn brands, whose merchandise is sold to its customers through retail stores, Websites, mobile applications, catalogs and customer contact centers. The Retail segment also includes Vetri Family, which operates restaurants under the names Amis, Alla Spina, Lo Spiedo, Pizzeria Vetri and Osteria. Its Wholesale segment consists of the Free People wholesale division that primarily designs, develops and markets young women’s contemporary casual apparel and shoes through individual and chain specialty stores and department stores. The Company’s Wholesale segment includes Free People-branded tops, bottoms, sweaters, dresses, intimates, shoes and activewear, which are sold through department and specialty stores around the world, and its Free People stores.

About L Brands

L Brands, Inc. operates specialty retail business. The Company is focused on women’s intimate and other apparel, personal care, beauty and home fragrance categories. Its segments include Victoria’s Secret, Bath & Body Works, and Victoria’s Secret and Bath & Body Works International. It sells its merchandise through company-owned specialty retail stores in the United States, Canada, the United Kingdom and Greater China, which are mall-based; through Websites, and through international franchise, license and wholesale partners. It operates in the retail brands, which include Victoria’s Secret, PINK, Bath & Body Works and La Senza. La Senza is a specialty retailer of women’s intimate apparel. It sells its La Senza products at over 120 La Senza stores in Canada. Henri Bendel sells handbags, jewelry and other accessory products through New York and 28 other stores. Mast Global is a merchandise sourcing and production function serving the Company and its international partners.

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