Stein Mart (NASDAQ: SMRT) and Carter’s (NYSE:CRI) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, profitability, valuation, dividends and institutional ownership.

Valuation and Earnings

This table compares Stein Mart and Carter’s’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Stein Mart $1.33 billion 0.04 $2.13 million ($0.55) -2.07
Carter’s $3.26 billion 1.24 $494.84 million $5.09 16.56

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

Institutional & Insider Ownership

41.7% of Stein Mart shares are owned by institutional investors. Comparatively, 99.9% of Carter’s shares are owned by institutional investors. 34.7% of Stein Mart shares are owned by company insiders. Comparatively, 3.1% of Carter’s shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings for Stein Mart and Carter’s, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stein Mart 0 3 0 0 2.00
Carter’s 0 4 6 0 2.60

Stein Mart currently has a consensus price target of $7.50, suggesting a potential upside of 557.89%. Carter’s has a consensus price target of $100.38, suggesting a potential upside of 19.10%. Given Stein Mart’s higher probable upside, analysts clearly believe Stein Mart is more favorable than Carter’s.

Risk & Volatility

Stein Mart has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, Carter’s has a beta of 0.32, meaning that its stock price is 68% less volatile than the S&P 500.

Dividends

Stein Mart pays an annual dividend of $0.30 per share and has a dividend yield of 26.3%. Carter’s pays an annual dividend of $1.48 per share and has a dividend yield of 1.8%. Stein Mart pays out -54.5% of its earnings in the form of a dividend. Carter’s pays out 29.1% 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. Stein Mart has raised its dividend for 3 consecutive years. Stein Mart is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Stein Mart and Carter’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stein Mart -1.89% -34.59% -4.43%
Carter’s 7.74% 33.18% 13.13%

Summary

Carter’s beats Stein Mart on 10 of the 16 factors compared between the two stocks.

Stein Mart Company Profile

Stein Mart, Inc. is a national retailer offering the fashion merchandise, service and presentation of a department or specialty store. The Company offers apparel for women and men, as well as accessories, shoes and home fashions. The Company’s target customers are women over 45 years old. The Company operates approximately 280 stores in over 30 states and an Internet store. Its stores are located in the Northeast, Midwest, Southeast, Texas and the Southwest. It is concentrated in the Southeast and Texas where over 180 of its stores are located. The Company’s stores offer a range of services, such as merchandise locator service, a Preferred Customer program, co-branded and private label credit card programs, and electronic gift cards. The Company’s merchants purchase products from approximately 1,200 vendors. It leases all of its store locations, generally for approximately 10 years with options to extend the lease term for over two or five year periods.

Carter’s Company Profile

Carter’s, Inc. (Carter’s) is a marketer of apparel for babies and young children in the United States and Canada. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh B’gosh (OshKosh). The Company operates through five segments: Carter’s Retail, Carter’s Wholesale, OshKosh Retail, OshKosh Wholesale and International. Its International segment includes company-operated retail stores and online Websites, wholesale operations, and royalty income from its international licensees. It markets products for consumers, and offer various product categories, including baby, sleepwear, play clothes, and related accessories. Its multi-channel international business model – retail stores, online and wholesale – enables it to reach a range of consumers around the world. As of December 31, 2016, its channels included approximately 18,000 wholesale locations, 792 stores in the United States, 164 stores in Canada, and its Canadian and the United States Websites.

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