Critical Review: Macy’s (NYSE:M) and Rakuten Group (OTCMKTS:RKUNF)

Rakuten Group (OTCMKTS:RKUNF) and Macy’s (NYSE:M) are both consumer discretionary companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, valuation, risk, earnings, dividends, analyst recommendations and institutional ownership.

Institutional and Insider Ownership

18.9% of Rakuten Group shares are held by institutional investors. Comparatively, 87.4% of Macy’s shares are held by institutional investors. 1.1% of Macy’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Rakuten Group and Macy’s”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rakuten Group	N/A	N/A	N/A	$27.96	0.16
Macy’s	$22.62 billion	0.26	$642.00 million	$2.42	9.32

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

Profitability

This table compares Rakuten Group and Macy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rakuten Group	N/A	N/A	N/A
Macy’s	2.94%	13.68%	3.88%

Analyst Recommendations

This is a summary of current ratings and target prices for Rakuten Group and Macy’s, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rakuten Group	0	0	0	0	0.00
Macy’s	2	7	3	1	2.23

Macy’s has a consensus target price of $22.78, indicating a potential upside of 1.03%. Given Macy’s’ stronger consensus rating and higher probable upside, analysts clearly believe Macy’s is more favorable than Rakuten Group.

Dividends

Rakuten Group pays an annual dividend of $2.70 per share and has a dividend yield of 61.3%. Macy’s pays an annual dividend of $0.77 per share and has a dividend yield of 3.4%. Rakuten Group pays out 9.6% of its earnings in the form of a dividend. Macy’s pays out 31.8% 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. Macy’s has raised its dividend for 4 consecutive years. Rakuten Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Macy’s beats Rakuten Group on 12 of the 15 factors compared between the two stocks.

About Rakuten Group

Rakuten Group, Inc. provides services in e-commerce, fintech, digital content, and communications to various users in Japan and internationally. The company operates through three segments: Internet Services, FinTech, and Mobile. The Internet Services segment provides range of e-commerce sites, such as Rakuten Ichiba, an Internet shopping mall, online cash-back sites, travel booking sites, portal sites, and digital content sites. It also offers messaging services and sells advertising; and manages professional sport teams. The FinTech segment offers financial services over the internet related to banking and securities, credit cards, life insurance, general insurance, electronic payment business, crypto asset (virtual currency) spot transaction, etc. The Mobile segment provides communication services and technology, electricity supply, and digital content site services. The company was formerly known as Rakuten, Inc. and changed its name to Rakuten Group, Inc. in April 2021. Rakuten Group, Inc. was incorporated in 1997 and is headquartered in Setagaya, Japan.

About Macy’s

Macy’s, Inc. engages in the retail of apparel, accessories, cosmetics, home furnishings, and other consumer goods. The firm’s brands include Macy’s, Bloomingdale’s, and Bluemercury. It offers men’s, women’s, and children’s apparel, women’s accessories, intimate apparel, shoes, cosmetics, fragrances, as well as home and miscellaneous products. The company was founded by Rowland H. Macy in 1858 and is headquartered in New York, NY.