Lululemon Athletica inc. (NASDAQ: LULU) and Hanesbrands (NYSE:HBI) are both mid-cap cyclical consumer goods & services companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, dividends, risk and earnings.

Analyst Recommendations

This is a breakdown of current recommendations for Lululemon Athletica inc. and Hanesbrands, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lululemon Athletica inc. 3 15 19 0 2.43
Hanesbrands 0 8 8 0 2.50

Lululemon Athletica inc. presently has a consensus price target of $65.72, suggesting a potential upside of 6.47%. Hanesbrands has a consensus price target of $26.80, suggesting a potential upside of 18.27%. Given Hanesbrands’ stronger consensus rating and higher probable upside, analysts plainly believe Hanesbrands is more favorable than Lululemon Athletica inc..

Dividends

Hanesbrands pays an annual dividend of $0.60 per share and has a dividend yield of 2.6%. Lululemon Athletica inc. does not pay a dividend. Hanesbrands pays out 39.5% of its earnings in the form of a dividend. Lululemon Athletica inc. has raised its dividend for 3 consecutive years.

Earnings and Valuation

This table compares Lululemon Athletica inc. and Hanesbrands’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lululemon Athletica inc. $2.44 billion 3.43 $519.98 million $2.08 29.68
Hanesbrands $6.36 billion 1.30 $1.05 billion $1.52 14.91

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

Volatility and Risk

Lululemon Athletica inc. has a beta of 0.2, suggesting that its stock price is 80% less 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.

Profitability

This table compares Lululemon Athletica inc. and Hanesbrands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lululemon Athletica inc. 8.38% 14.23% 11.85%
Hanesbrands 9.02% 64.80% 10.11%

Institutional and Insider Ownership

80.3% of Lululemon Athletica inc. shares are held by institutional investors. Comparatively, 94.8% of Hanesbrands shares are held by institutional investors. 0.3% of Lululemon Athletica inc. shares are held by company insiders. Comparatively, 1.1% of Hanesbrands shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Hanesbrands beats Lululemon Athletica inc. on 10 of the 17 factors compared between the two stocks.

About Lululemon Athletica inc.

lululemon athletica inc. is a designer, distributor and retailer of athletic apparel. The Company operates through two segments: Company-operated stores and Direct to consumer. It is also engaged in the sale from outlets, showrooms, sales from temporary locations, sales to wholesale accounts, warehouse sales, and license and supply arrangements. Its direct to consumer segment generates revenue from its lululemon and ivivva e-commerce Websites, www.lululemon.com and www.ivivva.com, and other country and region specific Websites. It offers a range of apparel and accessories for women, men and female youth. The Company’s apparel assortment includes items, such as pants, shorts, tops, and jackets designed for healthy lifestyle and athletic activities, such as yoga, running, training, most other sweaty pursuits, and athletic wear for female youth. The Company also offers fitness-related accessories, including an array of items, such as bags, socks, underwear, yoga mats and water bottles.

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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