L Brands (NYSE: LB) and Citi Trends (NASDAQ:CTRN) are both retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, institutional ownership, risk, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent ratings and target prices for L Brands and Citi Trends, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
L Brands 4 15 11 0 2.23
Citi Trends 0 0 0 0 N/A

L Brands currently has a consensus price target of $46.82, suggesting a potential upside of 9.42%. Given L Brands’ higher probable upside, analysts plainly believe L Brands is more favorable than Citi Trends.

Profitability

This table compares L Brands and Citi Trends’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
L Brands 8.04% -103.18% 12.00%
Citi Trends 1.88% 6.93% 4.69%

Earnings and Valuation

This table compares L Brands and Citi Trends’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
L Brands $12.26 billion 0.99 $2.34 billion $3.41 12.55
Citi Trends $712.38 million 0.41 $35.16 million $0.91 22.53

L Brands has higher revenue and earnings than Citi Trends. L Brands is trading at a lower price-to-earnings ratio than Citi Trends, indicating that it is currently the more affordable of the two stocks.

Dividends

L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 5.6%. Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.6%. L Brands pays out 70.4% of its earnings in the form of a dividend. Citi Trends pays out 35.2% 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. Citi Trends has increased its dividend for 6 consecutive years.

Insider & Institutional Ownership

79.5% of L Brands shares are held by institutional investors. Comparatively, 90.8% of Citi Trends shares are held by institutional investors. 16.7% of L Brands shares are held by insiders. Comparatively, 4.6% of Citi Trends shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

L Brands has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500. Comparatively, Citi Trends has a beta of 0.42, indicating that its stock price is 58% less volatile than the S&P 500.

Summary

L Brands beats Citi Trends on 11 of the 16 factors compared between the two stocks.

About L Brands

L Brands, Inc. operates specialty retail business. The Company is focused on women’s intimate and other apparel, personal care, beauty and home fragrance categories. Its segments include Victoria’s Secret, Bath & Body Works, and Victoria’s Secret and Bath & Body Works International. It sells its merchandise through company-owned specialty retail stores in the United States, Canada, the United Kingdom and Greater China, which are mall-based; through Websites, and through international franchise, license and wholesale partners. It operates in the retail brands, which include Victoria’s Secret, PINK, Bath & Body Works and La Senza. La Senza is a specialty retailer of women’s intimate apparel. It sells its La Senza products at over 120 La Senza stores in Canada. Henri Bendel sells handbags, jewelry and other accessory products through New York and 28 other stores. Mast Global is a merchandise sourcing and production function serving the Company and its international partners.

About Citi Trends

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

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