American Eagle Outfitters (NYSE: AEO) and Michael Kors (NYSE:KORS) are both mid-cap retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, risk, earnings and dividends.

Institutional and Insider Ownership

83.2% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 86.3% of Michael Kors shares are held by institutional investors. 5.8% of American Eagle Outfitters shares are held by company insiders. Comparatively, 6.0% of Michael Kors shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility & Risk

American Eagle Outfitters has a beta of 1.18, suggesting that its share price is 18% more volatile than the S&P 500. Comparatively, Michael Kors has a beta of 0.12, suggesting that its share price is 88% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for American Eagle Outfitters and Michael Kors, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Eagle Outfitters 2 6 9 0 2.41
Michael Kors 1 18 11 0 2.33

American Eagle Outfitters presently has a consensus target price of $16.19, indicating a potential downside of 11.74%. Michael Kors has a consensus target price of $52.61, indicating a potential downside of 19.36%. Given American Eagle Outfitters’ stronger consensus rating and higher possible upside, equities analysts clearly believe American Eagle Outfitters is more favorable than Michael Kors.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.7%. Michael Kors does not pay a dividend. American Eagle Outfitters pays out 54.3% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares American Eagle Outfitters and Michael Kors’ gross revenue, earnings per share 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 $0.92 19.93
Michael Kors $4.49 billion 2.21 $552.50 million $3.59 18.17

Michael Kors has higher revenue and earnings than American Eagle Outfitters. Michael Kors 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.

Profitability

This table compares American Eagle Outfitters and Michael Kors’ 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%
Michael Kors 12.68% 42.09% 28.42%

Summary

Michael Kors beats American Eagle Outfitters on 12 of the 16 factors compared between the two stocks.

About American Eagle Outfitters

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.

About Michael Kors

Michael Kors Holdings Limited is a designer, marketer, distributor and retailer of branded women’s apparel and accessories and men’s apparel bearing the Michael Kors tradename and related trademarks MICHAEL KORS, MICHAEL MICHAEL KORS, and various other related trademarks and logos. The Company operates through three segments: retail, wholesale and licensing. The Retail operations consist of collection stores and lifestyle stores, including concessions and outlet stores, located primarily in the Americas (the United States, Canada and Latin America), Europe and Asia, as well as e-commerce. Wholesale revenues are principally derived from major department and specialty stores located throughout the Americas, Europe and Asia. The Company licenses its trademarks on products, such as fragrances, beauty, eyewear, leather goods, jewelry, watches, coats, men’s suits, swimwear, furs and ties, as well as through geographic licenses.

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