Contrasting Stein Mart (SMRT) & Gap, Inc. (The) (GPS)

Stein Mart (NASDAQ: SMRT) and Gap, Inc. (The) (NYSE:GPS) are both apparel & accessories retailers – nec companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of current ratings for Stein Mart and Gap, Inc. (The), as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stein Mart 0 0 0 0 N/A
Gap, Inc. (The) 2 21 6 0 2.14

Gap, Inc. (The) has a consensus target price of $27.65, suggesting a potential downside of 5.96%. Given Gap, Inc. (The)’s higher possible upside, analysts plainly believe Gap, Inc. (The) is more favorable than Stein Mart.

Dividends

Stein Mart pays an annual dividend of $0.15 per share and has a dividend yield of 13.2%. Gap, Inc. (The) pays an annual dividend of $0.92 per share and has a dividend yield of 3.1%. Stein Mart pays out -27.3% of its earnings in the form of a dividend. Gap, Inc. (The) pays out 43.8% 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, Inc. (The) has raised its dividend for 7 consecutive years. Stein Mart is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Stein Mart and Gap, Inc. (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stein Mart -1.89% -34.59% -4.43%
Gap, Inc. (The) 5.42% 28.50% 10.64%

Earnings & Valuation

This table compares Stein Mart and Gap, Inc. (The)’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Stein Mart $1.36 billion 0.04 $400,000.00 ($0.55) -2.07
Gap, Inc. (The) $15.52 billion 0.74 $676.00 million $2.10 14.00

Gap, Inc. (The) has higher revenue and earnings than Stein Mart. Stein Mart is trading at a lower price-to-earnings ratio than Gap, Inc. (The), indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

31.4% of Stein Mart shares are owned by institutional investors. Comparatively, 56.8% of Gap, Inc. (The) shares are owned by institutional investors. 34.7% of Stein Mart shares are owned by insiders. Comparatively, 27.3% of Gap, Inc. (The) 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.

Volatility and Risk

Stein Mart has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500. Comparatively, Gap, Inc. (The) has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500.

Summary

Gap, Inc. (The) beats Stein Mart on 12 of the 15 factors compared between the two stocks.

About Stein Mart

Stein Mart, Inc. is a national retailer offering the fashion merchandise, service and presentation of a department or specialty store. The Company offers apparel for women and men, as well as accessories, shoes and home fashions. The Company’s target customers are women over 45 years old. The Company operates approximately 280 stores in over 30 states and an Internet store. Its stores are located in the Northeast, Midwest, Southeast, Texas and the Southwest. It is concentrated in the Southeast and Texas where over 180 of its stores are located. The Company’s stores offer a range of services, such as merchandise locator service, a Preferred Customer program, co-branded and private label credit card programs, and electronic gift cards. The Company’s merchants purchase products from approximately 1,200 vendors. It leases all of its store locations, generally for approximately 10 years with options to extend the lease term for over two or five year periods.

About Gap, Inc. (The)

The Gap, Inc. (Gap Inc.) is an apparel retail company. The Company offers apparel, accessories and personal care products for men, women and children under the Gap, Banana Republic, Old Navy, Athleta and Intermix brands. Its products are available to customers online through Company-owned Websites and through the use of third-parties that provide logistics and fulfillment services. In addition to operating in the specialty, outlet, online and franchise channels, it also uses the Company’s omni-channel capabilities to bridge the digital world and physical stores. Its omni-channel services, including order-in-store, reserve-in-store, find-in-store and ship-from-store are tailored across its portfolio of brands. It also sells products that are designed and manufactured by branded third-parties, especially at its Intermix brands. It has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico.

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