Kate Spade & Company (NYSE: KATE) and Hanesbrands (NYSE:HBI) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their profitabiliy, risk, analyst recommendations, earnings, valuation, dividends and institutional ownership.

Dividends

Hanesbrands pays an annual dividend of $0.60 per share and has a dividend yield of 2.7%. Kate Spade & Company does not pay a dividend. Hanesbrands pays out 43.2% of its earnings in the form of a dividend. Kate Spade & Company has increased its dividend for 3 consecutive years.

Insider and Institutional Ownership

98.6% of Kate Spade & Company shares are held by institutional investors. Comparatively, 93.6% of Hanesbrands shares are held by institutional investors. 1.0% of Kate Spade & Company shares are held by insiders. Comparatively, 1.1% of Hanesbrands shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Kate Spade & Company and Hanesbrands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kate Spade & Company 10.40% 22.47% 8.03%
Hanesbrands 8.56% 65.05% 10.31%

Analyst Recommendations

This is a summary of current ratings and target prices for Kate Spade & Company and Hanesbrands, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kate Spade & Company 1 13 2 0 2.06
Hanesbrands 1 4 6 1 2.58

Kate Spade & Company currently has a consensus target price of $20.19, suggesting a potential upside of 9.21%. Hanesbrands has a consensus target price of $28.50, suggesting a potential upside of 29.31%. Given Hanesbrands’ stronger consensus rating and higher possible upside, analysts plainly believe Hanesbrands is more favorable than Kate Spade & Company.

Volatility and Risk

Kate Spade & Company has a beta of 1.64, suggesting that its stock price is 64% more volatile than the S&P 500. Comparatively, Hanesbrands has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500.

Earnings and Valuation

This table compares Kate Spade & Company and Hanesbrands’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kate Spade & Company $1.38 billion 1.72 $233.62 million $1.11 16.66
Hanesbrands $6.19 billion 1.30 $1.03 billion $1.39 15.86

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

Summary

Hanesbrands beats Kate Spade & Company on 11 of the 18 factors compared between the two stocks.

About Kate Spade & Company

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.

About Hanesbrands

Hanesbrands Inc. is a marketer of basic innerwear and activewear apparel in the Americas, Europe, Australia and Asia/Pacific under apparel brands, such as Hanes, Champion, Maidenform, DIM, Bali, Playtex, Bonds, JMS/Just My Size, Nur Die/Nur Der, L’eggs, Lovable, Wonderbra, Flexees, Gear for Sports and Berlei. The Company operates through four segments: Innerwear, Activewear, Direct to Consumer and International. The Innerwear segment focuses on core apparel products, such as intimate apparel, men’s underwear, women’s panties, children’s underwear, socks and hosiery. The Company operates in the activewear market through its Champion, Hanes and JMS/Just My Size brands. The Direct to Consumer segment operations include its domestic Company-operated outlet stores and Website operations that sell its branded products directly to consumers in the United States. The International segment includes products that primarily span across the innerwear and activewear segments.

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