Citi Trends (NASDAQ: CTRN) and L Brands (NYSE:LB) are both retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Profitability

This table compares Citi Trends and L Brands’ 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%
L Brands 8.04% -103.18% 12.00%

Valuation & Earnings

This table compares Citi Trends and L Brands’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Citi Trends $712.38 million 0.41 $35.16 million $0.91 22.54
L Brands $12.26 billion 0.99 $2.34 billion $3.41 12.60

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

Dividends

Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.6%. L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 5.6%. Citi Trends pays out 35.2% of its earnings in the form of a dividend. L Brands pays out 70.4% 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. L Brands has raised its dividend for 6 consecutive years. L Brands is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

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, L Brands has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Insider and Institutional Ownership

90.8% of Citi Trends shares are owned by institutional investors. Comparatively, 79.5% of L Brands shares are owned by institutional investors. 4.6% of Citi Trends shares are owned by insiders. Comparatively, 16.7% of L Brands shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for Citi Trends and L Brands, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Citi Trends 0 0 0 0 N/A
L Brands 4 16 10 0 2.20

L Brands has a consensus target price of $46.50, suggesting a potential upside of 8.27%. Given L Brands’ higher possible upside, analysts plainly believe L Brands is more favorable than Citi Trends.

Summary

L Brands beats Citi Trends on 12 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.

L Brands Company Profile

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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