Kate Spade & Co (NYSE: KATE) and American Eagle Outfitters (NYSE:AEO) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, dividends and risk.

Risk and Volatility

Kate Spade & Co has a beta of 1.75, indicating that its share price is 75% more volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500.

Valuation & Earnings

This table compares Kate Spade & Co and American Eagle Outfitters’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kate Spade & Co N/A N/A N/A $1.11 16.66
American Eagle Outfitters $3.64 billion 0.67 $479.75 million $0.97 14.28

American Eagle Outfitters has higher revenue and earnings than Kate Spade & Co. American Eagle Outfitters is trading at a lower price-to-earnings ratio than Kate Spade & Co, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Kate Spade & Co and American Eagle Outfitters’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kate Spade & Co 0.44% 1.11% 0.43%
American Eagle Outfitters 4.85% 18.25% 12.17%

Insider & Institutional Ownership

97.9% of Kate Spade & Co shares are held by institutional investors. Comparatively, 83.9% of American Eagle Outfitters shares are held by institutional investors. 0.8% of Kate Spade & Co shares are held by company insiders. Comparatively, 5.8% of American Eagle Outfitters shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.6%. Kate Spade & Co does not pay a dividend. American Eagle Outfitters pays out 51.5% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Kate Spade & Co and American Eagle Outfitters, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kate Spade & Co 1 13 1 0 2.00
American Eagle Outfitters 3 8 9 0 2.30

Kate Spade & Co currently has a consensus price target of $20.04, indicating a potential upside of 8.39%. American Eagle Outfitters has a consensus price target of $15.03, indicating a potential upside of 8.48%. Given American Eagle Outfitters’ stronger consensus rating and higher probable upside, analysts clearly believe American Eagle Outfitters is more favorable than Kate Spade & Co.

Summary

American Eagle Outfitters beats Kate Spade & Co on 9 of the 13 factors compared between the two stocks.

Kate Spade & Co Company Profile

Kate Spade & Company is engaged in the design and marketing of a range of accessories and apparel. It operates through three segments. The KATE SPADE North America segment consists of the Company’s kate spade new york and JACK SPADE brands in North America. The KATE SPADE International segment consists of the Company’s kate spade new york and JACK SPADE brands in international markets, which operates principally in Japan, Asia (excluding Japan), Europe and Latin America). The Adelington Design Group segment primarily consists of exclusive arrangements to supply jewelry for the LIZ CLAIBORNE and MONET brands. In addition, the Adelington Design Group segment serves J.C. Penney Corporation, Inc. (JCPenney) through exclusive supplier agreements for the LIZ CLAIBORNE and MONET jewelry lines. As of December 31, 2016, it operated 98 the United States Specialty Retail Stores; 35 Foreign Specialty Retail Stores; 65 the United States Outlet Stores; 17 Foreign Outlet Stores, and 54 Concessions.

American Eagle Outfitters Company Profile

American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.

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