L Brands (LB) and Genesco (GCO) Critical Survey

L Brands (NYSE: LB) and Genesco (NYSE:GCO) are both cyclical consumer goods & services companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, profitability, institutional ownership, dividends and earnings.

Dividends

L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 4.8%. Genesco does not pay a dividend. L Brands pays out 73.2% of its earnings in the form of a dividend. Genesco has increased its dividend for 7 consecutive years.

Profitability

This table compares L Brands and Genesco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
L Brands 7.73% -101.19% 11.49%
Genesco -4.24% 6.93% 4.03%

Institutional & Insider Ownership

78.7% of L Brands shares are held by institutional investors. Comparatively, 97.7% of Genesco shares are held by institutional investors. 16.7% of L Brands shares are held by company insiders. Comparatively, 3.3% of Genesco 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.

Volatility & Risk

L Brands has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, Genesco has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500.

Earnings & Valuation

This table compares L Brands and Genesco’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
L Brands $12.57 billion 1.12 $1.16 billion $3.28 15.25
Genesco $2.87 billion 0.24 $97.43 million ($6.30) -5.57

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

Analyst Recommendations

This is a summary of current ratings for L Brands and Genesco, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
L Brands 4 17 12 0 2.24
Genesco 0 4 4 0 2.50

L Brands presently has a consensus target price of $52.19, suggesting a potential upside of 4.35%. Genesco has a consensus target price of $34.25, suggesting a potential downside of 2.42%. Given L Brands’ higher possible upside, analysts clearly believe L Brands is more favorable than Genesco.

Summary

L Brands beats Genesco on 11 of the 17 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 Genesco

Genesco Inc. is a retailer and wholesaler of footwear, apparel and accessories. The Company operates in five segments: Journeys Group, Schuh Group, Lids Sports Group, Johnston & Murphy Group and Licensed Brands. It relies on independent third-party manufacturers for production of its footwear products sold at wholesale. It sources footwear and accessory products from foreign manufacturers located in Bangladesh, Brazil, Cambodia, Canada, China, Dominican Republic, El Salvador, France, Germany, Hong Kong, India, Indonesia, Italy, Mexico, the Netherlands, Portugal, Peru, Romania, Taiwan and Vietnam. As of January 28, 2017, it operated 2,794 retail footwear, headwear and sports apparel and accessory stores and leased departments located primarily throughout the United States and in Puerto Rico, including 147 headwear and sports apparel and accessory stores and 87 footwear stores in Canada and 128 footwear stores in the United Kingdom, the Republic of Ireland and Germany.

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