American Eagle Outfitters (NYSE: AEO) and Guess? (NYSE:GES) are both cyclical consumer goods & services companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, analyst recommendations and valuation.

Institutional and Insider Ownership

83.2% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 82.4% of Guess? shares are held by institutional investors. 5.9% of American Eagle Outfitters shares are held by insiders. Comparatively, 29.6% of Guess? shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares American Eagle Outfitters and Guess?’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Eagle Outfitters 4.50% 17.42% 11.63%
Guess? -0.10% 4.35% 2.72%

Analyst Recommendations

This is a summary of current ratings and recommmendations for American Eagle Outfitters and Guess?, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Eagle Outfitters 2 7 9 0 2.39
Guess? 1 5 3 0 2.22

American Eagle Outfitters currently has a consensus target price of $15.83, suggesting a potential downside of 13.57%. Guess? has a consensus target price of $14.74, suggesting a potential downside of 11.16%. Given Guess?’s higher possible upside, analysts clearly believe Guess? is more favorable than American Eagle Outfitters.

Risk & Volatility

American Eagle Outfitters has a beta of 1.18, meaning that its share price is 18% more volatile than the S&P 500. Comparatively, Guess? has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.7%. Guess? pays an annual dividend of $0.90 per share and has a dividend yield of 5.4%. American Eagle Outfitters pays out 54.9% of its earnings in the form of a dividend. Guess? pays out -2,250.0% 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. Guess? has increased its dividend for 3 consecutive years. Guess? is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares American Eagle Outfitters and Guess?’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Eagle Outfitters $3.61 billion 0.90 $212.44 million $0.91 20.13
Guess? $2.21 billion 0.62 $22.76 million ($0.04) -414.75

American Eagle Outfitters has higher revenue and earnings than Guess?. Guess? is trading at a lower price-to-earnings ratio than American Eagle Outfitters, indicating that it is currently the more affordable of the two stocks.

Summary

American Eagle Outfitters beats Guess? on 12 of the 17 factors compared between the two stocks.

American Eagle Outfitters Company Profile

American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.

Guess? Company Profile

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collections of apparel and accessories for men, women and children. The Company operates through five segments: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia. The Licensing segment includes the around the world licensing operations of the Company. Its apparel is marketed under various names, including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, MARCIANO, Question Mark and Triangle Design, GUESS Kids, Baby GUESS, YES, G by GUESS and GUESS by MARCIANO.

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