Contrasting American Eagle Outfitters (AEO) and Citi Trends (CTRN)

American Eagle Outfitters (NYSE: AEO) and Citi Trends (NASDAQ:CTRN) are both retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, dividends, risk, earnings, analyst recommendations and valuation.

Earnings and Valuation

This table compares American Eagle Outfitters and Citi Trends’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Eagle Outfitters $3.64 billion 0.63 $479.75 million $0.97 13.42
Citi Trends $712.38 million 0.44 $35.16 million $0.91 23.91

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

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.8%. Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.5%. American Eagle Outfitters pays out 51.5% of its earnings in the form of a dividend. Citi Trends pays out 35.2% 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.

Analyst Ratings

This is a breakdown of current ratings for American Eagle Outfitters and Citi Trends, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Eagle Outfitters 3 8 9 0 2.30
Citi Trends 0 0 0 0 N/A

American Eagle Outfitters currently has a consensus price target of $14.76, indicating a potential upside of 13.39%. Given American Eagle Outfitters’ higher probable upside, analysts clearly believe American Eagle Outfitters is more favorable than Citi Trends.

Institutional and Insider Ownership

84.5% of American Eagle Outfitters shares are owned by institutional investors. Comparatively, 91.1% of Citi Trends shares are owned by institutional investors. 5.8% of American Eagle Outfitters shares are owned by company insiders. Comparatively, 4.6% of Citi Trends shares are owned 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 and Risk

American Eagle Outfitters has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500. Comparatively, Citi Trends has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500.

Profitability

This table compares American Eagle Outfitters and Citi Trends’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Eagle Outfitters 4.85% 18.25% 12.17%
Citi Trends 1.88% 6.93% 4.69%

Summary

American Eagle Outfitters beats Citi Trends on 12 of the 15 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 Citi Trends

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

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