Carter’s (NYSE: CRI) and L Brands (NYSE:LB) are both mid-cap consumer discretionary companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, dividends, analyst recommendations, risk, institutional ownership, earnings and valuation.
Risk and Volatility
Carter’s has a beta of 0.34, suggesting that its stock price is 66% less volatile than the S&P 500. Comparatively, L Brands has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500.
This is a summary of recent ratings and recommmendations for Carter’s and L Brands, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Carter’s presently has a consensus target price of $103.10, indicating a potential upside of 7.73%. L Brands has a consensus target price of $46.50, indicating a potential upside of 8.34%. Given L Brands’ higher probable upside, analysts plainly believe L Brands is more favorable than Carter’s.
This table compares Carter’s and L Brands’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Earnings and Valuation
This table compares Carter’s and L Brands’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Carter’s||$3.26 billion||1.40||$494.84 million||$5.09||18.80|
|L Brands||$12.26 billion||0.99||$2.34 billion||$3.41||12.59|
L Brands has higher revenue and earnings than Carter’s. L Brands is trading at a lower price-to-earnings ratio than Carter’s, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
97.1% of Carter’s shares are held by institutional investors. Comparatively, 79.5% of L Brands shares are held by institutional investors. 3.1% of Carter’s shares are held by company insiders. Comparatively, 16.7% of L Brands shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Carter’s pays an annual dividend of $1.48 per share and has a dividend yield of 1.5%. L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 5.6%. Carter’s pays out 29.1% of its earnings in the form of a dividend. L Brands pays out 70.4% 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. Carter’s has increased its dividend for 6 consecutive years and L Brands has increased its dividend for 3 consecutive years.
Carter’s beats L Brands on 9 of the 17 factors compared between the two stocks.
Carter’s, Inc. (Carter’s) is a marketer of apparel for babies and young children in the United States and Canada. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh B’gosh (OshKosh). The Company operates through five segments: Carter’s Retail, Carter’s Wholesale, OshKosh Retail, OshKosh Wholesale and International. Its International segment includes company-operated retail stores and online Websites, wholesale operations, and royalty income from its international licensees. It markets products for consumers, and offer various product categories, including baby, sleepwear, play clothes, and related accessories. Its multi-channel international business model – retail stores, online and wholesale – enables it to reach a range of consumers around the world. As of December 31, 2016, its channels included approximately 18,000 wholesale locations, 792 stores in the United States, 164 stores in Canada, and its Canadian and the United States Websites.
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.
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