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

Institutional & Insider Ownership

97.9% of Kate Spade & Co shares are held by institutional investors. Comparatively, 90.4% of Ross Stores shares are held by institutional investors. 0.8% of Kate Spade & Co shares are held by company insiders. Comparatively, 2.3% of Ross Stores shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Kate Spade & Co and Ross Stores’ 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%
Ross Stores 9.22% 45.20% 22.94%

Risk & Volatility

Kate Spade & Co has a beta of 1.75, indicating that its stock price is 75% more volatile than the S&P 500. Comparatively, Ross Stores has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Kate Spade & Co and Ross Stores, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kate Spade & Co 1 13 1 0 2.00
Ross Stores 0 7 13 0 2.65

Kate Spade & Co currently has a consensus target price of $20.04, indicating a potential upside of 8.39%. Ross Stores has a consensus target price of $70.71, indicating a potential upside of 10.79%. Given Ross Stores’ stronger consensus rating and higher probable upside, analysts plainly believe Ross Stores is more favorable than Kate Spade & Co.

Dividends

Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 1.0%. Kate Spade & Co does not pay a dividend. Ross Stores pays out 21.1% of its earnings in the form of a dividend. Ross Stores has increased its dividend for 10 consecutive years.

Earnings & Valuation

This table compares Kate Spade & Co and Ross Stores’ revenue, earnings per share 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
Ross Stores $13.33 billion 1.85 $2.19 billion $3.03 21.06

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

Summary

Ross Stores beats Kate Spade & Co on 11 of the 14 factors compared between the two stocks.

About Kate Spade & Co

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 Ross Stores

Ross Stores, Inc. and its subsidiaries operate two brands of off-price retail apparel and home fashion stores-Ross Dress for Less (Ross) and dd’s DISCOUNTS. The Company is the off-price apparel and home fashion chain in the United States, with 1,340 locations in 36 states, the District of Columbia and Guam, as of January 28, 2017. The Company offers in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. The Company also operated 193 dd’s DISCOUNTS stores in 15 states as of January 28, 2017. As of January 28, 2017, the Company operated a total of 1,533 stores consisted of 1,340 Ross stores and 193 dd’s DISCOUNTS stores. As of January 28, 2017, the Company owned and operated six distribution processing facilities-three in California, one in Pennsylvania, and two in South Carolina.

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