Contrasting Carter’s (NYSE:CRI) and Columbia Sportswear (NASDAQ:COLM)

Columbia Sportswear (NASDAQ:COLM) and Carter’s (NYSE:CRI) are both consumer discretionary companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, analyst recommendations, institutional ownership, earnings, dividends and risk.

Volatility & Risk

Columbia Sportswear has a beta of 0.88, indicating that its stock price is 12% less volatile than the S&P 500. Comparatively, Carter’s has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500.

Dividends

Columbia Sportswear pays an annual dividend of $1.20 per share and has a dividend yield of 1.7%. Carter’s pays an annual dividend of $1.00 per share and has a dividend yield of 2.9%. Columbia Sportswear pays out 26.3% of its earnings in the form of a dividend. Carter’s pays out 16.6% 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. Carter’s is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Columbia Sportswear and Carter’s”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Columbia Sportswear	$3.43 billion	1.05	$177.22 million	$4.56	15.70
Carter’s	$2.90 billion	0.43	$91.80 million	$6.02	5.63

Columbia Sportswear has higher revenue and earnings than Carter’s. Carter’s is trading at a lower price-to-earnings ratio than Columbia Sportswear, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Columbia Sportswear and Carter’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Columbia Sportswear	6.97%	11.71%	6.90%
Carter’s	7.40%	13.25%	4.99%

Institutional and Insider Ownership

47.8% of Columbia Sportswear shares are owned by institutional investors. 51.9% of Columbia Sportswear shares are owned by insiders. Comparatively, 3.2% of Carter’s shares are owned 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.

Analyst Recommendations

This is a breakdown of current recommendations for Columbia Sportswear and Carter’s, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Columbia Sportswear	1	3	2	0	2.17
Carter’s	1	5	3	1	2.40

Columbia Sportswear presently has a consensus price target of $66.40, suggesting a potential downside of 7.27%. Carter’s has a consensus price target of $38.62, suggesting a potential upside of 13.94%. Given Carter’s’ stronger consensus rating and higher probable upside, analysts plainly believe Carter’s is more favorable than Columbia Sportswear.

Summary

Carter’s beats Columbia Sportswear on 9 of the 17 factors compared between the two stocks.

About Columbia Sportswear

Columbia Sportswear Company designs, sources, markets and distributes outdoor and active-lifestyle apparel, footwear, accessories and equipment. Its products serve activities such as hiking, skiing, fishing and other outdoor pursuits, as well as everyday wear. The company’s portfolio includes the Columbia, SOREL, Mountain Hardwear and prAna brands. Its offerings range from jackets, shirts and pants to boots, shoes, backpacks and other outdoor accessories. Founded in 1938 as a hat distributor in Portland, Oregon, Columbia Sportswear has grown into a global business.

About Carter’s

Carter’s, Inc. designs, sources and markets apparel and related products for babies and young children. Its offerings include clothing, sleepwear, footwear, accessories and gifts, sold under brands including Carter’s, OshKosh B’gosh, Skip Hop and Little Planet. Founded in 1865 by William Carter, the company has a long history in children’s apparel. Its products reach customers through company-operated stores and e-commerce sites, as well as wholesale relationships with retailers and other distribution partners.