Analyzing Hennes & Mauritz (OTCMKTS:HNNMY) & GAP (NYSE:GAP)

Hennes & Mauritz (OTCMKTS:HNNMY) and GAP (NYSE:GAP) are both retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, earnings, valuation and risk.

Earnings and Valuation

This table compares Hennes & Mauritz and GAP”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hennes & Mauritz	$22.18 billion	1.15	$1.11 billion	$0.14	25.86
GAP	$15.17 billion	0.57	$844.00 million	$2.34	10.02

Hennes & Mauritz has higher revenue and earnings than GAP. GAP is trading at a lower price-to-earnings ratio than Hennes & Mauritz, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Hennes & Mauritz has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500. Comparatively, GAP has a beta of 2.17, suggesting that its share price is 117% more volatile than the S&P 500.

Dividends

Hennes & Mauritz pays an annual dividend of $0.08 per share and has a dividend yield of 2.2%. GAP pays an annual dividend of $0.66 per share and has a dividend yield of 2.8%. Hennes & Mauritz pays out 57.1% of its earnings in the form of a dividend. GAP pays out 28.2% 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. GAP has increased its dividend for 1 consecutive years. GAP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

0.0% of Hennes & Mauritz shares are owned by institutional investors. Comparatively, 58.8% of GAP shares are owned by institutional investors. 30.6% of GAP shares are owned by 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.

Profitability

This table compares Hennes & Mauritz and GAP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hennes & Mauritz	4.80%	26.34%	6.32%
GAP	5.86%	27.04%	7.49%

Analyst Recommendations

This is a summary of current ratings for Hennes & Mauritz and GAP, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hennes & Mauritz	1	5	0	1	2.14
GAP	0	11	7	0	2.39

GAP has a consensus target price of $25.94, suggesting a potential upside of 10.62%. Given GAP’s stronger consensus rating and higher possible upside, analysts clearly believe GAP is more favorable than Hennes & Mauritz.

Summary

GAP beats Hennes & Mauritz on 13 of the 18 factors compared between the two stocks.

About Hennes & Mauritz

H & M Hennes & Mauritz AB (publ) provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, and children worldwide. It offers sportswear, shoes, bags, beauty products, activewear, jeans, and ready-to-wear; and interior products, including bed linens, dinnerware, textiles, furniture, and lighting. The company provides its products under the H&M, H&M HOME, H&M Move, H&M Beauty, COS, Weekday, Monki, & Other Stories, ARKET, Afound, and Singular Society brand names. In addition, it operates Sellpy, a broad digital platform for second-hand fashion and other products; and Creator Studio, a global platform for merchandise design and production, as well as provides solutions to extend the useful life of unwanted garments through reuse and recycling under Looper Textile name. The company offers its products through online and physical stores. H & M Hennes & Mauritz AB (publ) was incorporated in 1943 and is headquartered in Stockholm, Sweden.

About GAP

Gap, Inc. operates as a global apparel retail company, which offers clothing, apparel, accessories, and personal care products for men, women, and children. The firm operates through the following segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Other. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody, and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags, and fragrances. The Athleta segment offers fitness apparel for women. The company founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.