Analyzing GAP (NYSE:GAP) & Next (OTCMKTS:NXGPY)

GAP (NYSE:GAP) and Next (OTCMKTS:NXGPY) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, dividends, risk, earnings and valuation.

Risk & Volatility

GAP has a beta of 2.27, suggesting that its share price is 127% more volatile than the S&P 500. Comparatively, Next has a beta of 1.06, suggesting that its share price is 6% more volatile than the S&P 500.

Profitability

This table compares GAP and Next’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GAP	5.31%	22.98%	6.70%
Next	N/A	N/A	N/A

Institutional & Insider Ownership

58.8% of GAP shares are owned by institutional investors. 30.6% of GAP 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.

Valuation and Earnings

This table compares GAP and Next”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GAP	$15.37 billion	0.60	$816.00 million	$2.15	11.82
Next	$9.16 billion	2.43	$1.18 billion	N/A	N/A

Next has lower revenue, but higher earnings than GAP.

Analyst Ratings

This is a summary of recent recommendations and price targets for GAP and Next, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GAP	0	4	11	2	2.88
Next	0	2	0	0	2.00

GAP presently has a consensus target price of $30.62, suggesting a potential upside of 20.46%. Given GAP’s stronger consensus rating and higher possible upside, research analysts clearly believe GAP is more favorable than Next.

Dividends

GAP pays an annual dividend of $0.66 per share and has a dividend yield of 2.6%. Next pays an annual dividend of $1.03 per share and has a dividend yield of 1.1%. GAP pays out 30.7% of its earnings in the form of a dividend. GAP has increased its dividend for 1 consecutive years. GAP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

GAP beats Next on 13 of the 16 factors compared between the two stocks.

About GAP

Gap, Inc. operates as a global apparel retail company, which offers clothing, apparel, accessories, and personal care products for men, women, and children. The firm operates through the following segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Other. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody, and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags, and fragrances. The Athleta segment offers fitness apparel for women. The company founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.

About Next

NEXT plc engages in the retail of clothing, beauty, footwear, and home products in the United Kingdom, rest of Europe, the Middle East, Asia, and internationally. The company operates through NEXT Retail; NEXT Online; NEXT Finance; Total Platform; Property Management; and Franchise, Sourcing, and other segments. It offers consumer credit; NEXT branded products; and women’s, men’s, children’s, clothing, homeware, and beauty products under the LABEL brand, as well as other third-party brands. The company also provides property management services, including holding and lease of properties; operates call centers; and websites, marketing, warehousing, and distribution networks to third-party brands. It operates through retail stores, online retail platforms, and franchise stores. The company was formerly known as J Hepworth & Son and changed its name to NEXT plc in 1986. NEXT plc was founded in 1864 and is headquartered in Enderby, the United Kingdom.